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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moven news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: All right, let's talk about the global energy space. I'm

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Speaker 1: looking at WTI coude oil a little bit higher today,

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Speaker 1: about six to nine dollars about. There's a lot going

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Speaker 1: on there. We got some deals going on there. We

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Speaker 1: got Netherlands closing a gas field when there rushes at

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Speaker 1: a war with Ukraine. I have no idea what's going on.

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Speaker 1: Scott Levine does, and Fernando vli He also does. They

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Speaker 1: both cover the energy space for Bloomberg Intelligence. Fernando joins

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Speaker 1: us via Zoom and Scott Levine is here in our

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Speaker 1: Bloomberg Interactive Brokers studio. So Scott, let's start with you here.

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Speaker 1: We've got an m and a deal in the energy space,

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Speaker 1: in the shale space. Talk to us about what's happening today, Yes.

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Speaker 3: Paul, So basically what we have is Patterson Uti, which

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Speaker 3: is the number two land driller in the US buying

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Speaker 3: or merging with you look at it a company called

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Speaker 3: Next Tier oil Field Solutions, which is a top four

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Speaker 3: player in pressure pumping. And you know, basically Patterson has

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Speaker 3: been rumored to be disinterested in fracking over the years

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Speaker 3: and will effectively be the number two player in both

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Speaker 3: spaces and really the only major player in both fracking

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Speaker 3: and pressure pumping. So this is probably the largest deal

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Speaker 3: that we've seen since twenty twenty, and you know, raises

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Speaker 3: a lot of interesting questions about what we're looking at

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Speaker 3: in a potentially slowing shale market.

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Speaker 4: Fernando, I want to bring you into this conversation. What's

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Speaker 4: your take on oil demand growth moving forward?

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Speaker 5: Well, I think there are two paradigms. The short term,

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Speaker 5: where you know, as aviate I was saying about interest

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Speaker 5: rates and impacting demand that ultimately will translate into lower

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Speaker 5: oil them in because of lower consumption. Oil still used

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Speaker 5: in the majority of our transportation, especially for industrials and

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Speaker 5: for all of our retails.

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Speaker 6: So if that.

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Speaker 5: Is at a lower level because of higher interest rates globally,

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Speaker 5: then oil demand should also falter. But then in the

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Speaker 5: longer term. You know, we saw the E I E

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Speaker 5: I should say, coming out with their prediction that peak

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Speaker 5: oil demand is within the decade.

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Speaker 6: We're a little slower on that.

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Speaker 5: We think there's still a lot of hurdles to clear

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Speaker 5: before we can start weaning off of oil. You know,

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Speaker 5: as a reminder of five billion people in the emergent

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Speaker 5: market still consume a very small amount of still consume

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Speaker 5: a very small amount of energy, and oil will be

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Speaker 5: critical in improving their standard of living and continuing to grow.

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Speaker 1: Hey, Scott, when we see an m and a deal

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Speaker 1: of this size and this magnitude in the shale space,

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Speaker 1: what does it tell you about kind of where we

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Speaker 1: are in the cycle, where the next several years of

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Speaker 1: the shale business looks like because it's been such a

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Speaker 1: growth area for domestic US energy.

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Speaker 3: Yeah, no, I think it clearly suggests that we're heading

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Speaker 3: in the wrong direction here. Really, the rig coount has

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Speaker 3: fallen close to ten percent this year. I think the

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Speaker 3: messaging initially was that it was due almost entirely to

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Speaker 3: pull back in natural gas drilling resulting from the collapse

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Speaker 3: seventy five percent collapse in Henry hub prices. You know,

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Speaker 3: the messaging was that we'd see a strengthen the oil

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Speaker 3: side compensating for the weakness and the gas side, but

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Speaker 3: we've yet to see that in the rig counts. Recounts

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Speaker 3: have gone down by almost fifty rigs in the last

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Speaker 3: month or so, and so the appeal here, you know,

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Speaker 3: more than anything else, seems to be the two hundred

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Speaker 3: mill and synergies that Patterson will realize on this deal.

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Speaker 3: And so while seventy dollars oil is not the worst

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Speaker 3: thing in the world for the industry, given some of

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Speaker 3: the broader macro concerns that are out there, this suggests

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Speaker 3: to me that we're heading through a slow patch at

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Speaker 3: a minimum, and that you know, this is more of

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Speaker 3: a defensive deal than an offensive one.

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Speaker 4: Do you have a particular target, Scott when it comes

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Speaker 4: to if you're looking at US CREUD prices versus BRIN

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Speaker 4: at year end versus what those could be at the

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Speaker 4: end of twenty twenty four.

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Speaker 3: Yeah, No, I think the expectation, you know, would be

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Speaker 3: that we're about at and Fernando probably can elaborate on

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Speaker 3: this a little bit more as well on the oil side,

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Speaker 3: that maybe we're looking at stability, maybe some slight improvement potentially,

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Speaker 3: but I can definitely say that what we've seen so

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Speaker 3: far this year in the US has been weaker than

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Speaker 3: we would have expected, and I think anybody would have expected.

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Speaker 3: And you know, I would turn it over to Fernando,

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Speaker 3: you know, to elaborate further on oil price.

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Speaker 4: Specific Yeah, Fernando, what are your thoughts as far as

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Speaker 4: the trajectory when you're looking at US versus Brent?

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Speaker 5: And we think, you know, you can't fight the FED

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Speaker 5: right now. And we we along with Mike mcglowane, we

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Speaker 5: have talked a lot about how we think it's lower

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Speaker 5: at first, because the demand side of the equation is

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Speaker 5: going to be the most important. We think opex cuts

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Speaker 5: are lowering the supply of Brent. That's widened the differential

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Speaker 5: between WTI and Brent. And then now we've had a

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Speaker 5: small amount of acquisitions in the strategic Patrol and reserve

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Speaker 5: boosting that wt I demand a little bit, So that's

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Speaker 5: widened that gap, and we think we could go above

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Speaker 5: five dollars a barrow, maybe five point fifty in the

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Speaker 5: discount between WTI and Brent for the remainder of the year.

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Speaker 1: Hey, hey, Fernando, I see in a news here that

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Speaker 1: our good friends in Holland are closing Europe's biggest gas field.

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Speaker 1: What's going on there? Don't they know? There's war in

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Speaker 1: Ukraine and gases short? I mean, what's going on there?

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Speaker 7: They do?

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Speaker 5: It's long been planning a plan to close the Groningen field,

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Speaker 5: as you said, the Europe's largest field, because of earth

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Speaker 5: tremors in the Netherlands. They actually were supposed to close

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Speaker 5: last year and they've extended it because of the war.

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Speaker 5: But now with the inventory is refilled, they feel more

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Speaker 5: comfortable closing that closing that field, you know, it's probably

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Speaker 5: not the greatest decision from an energy security standpoint. Perhaps

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Speaker 5: a little bit of security again false sense of security

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Speaker 5: because we had such a mild winter this past year,

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Speaker 5: and it definitely makes Europe lean more on USLNG imports.

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Speaker 1: Hey Scott, just real quick thirty seconds. Are we going

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Speaker 1: to see more emine activity and kind of your space

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Speaker 1: the energy space?

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Speaker 7: Yeah?

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Speaker 3: Now for services, I think we may see some more activity,

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Speaker 3: particularly in the US. All you know, this is again

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Speaker 3: the first survey, This is deal that we've seen in

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Speaker 3: recent memory of a public to public as opposed to

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Speaker 3: the EMP space where has put a ton of deal making.

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Speaker 3: So particularly if the outlook continues to deteriorate and rigganfraccounts

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Speaker 3: move lower, I think you could look for an increase

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Speaker 3: an M and A activity from here.

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Speaker 1: All right, guys, thanks so much for joining us. Love

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Speaker 1: getting that roundtable on global energy. We've got some M

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Speaker 1: and A going on there in the services side in

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Speaker 1: the US, and we've of course got the global supply

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Speaker 1: and demand for energy. Scott Levine and Fernando Valle, both

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Speaker 1: senior analysts covering the energy space for Bloomberg Intelligence, joining

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Speaker 1: us here, so we appreciate getting their thoughts.

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Speaker 6: You're listening to the team.

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Speaker 8: Ken's a our live program Bloomberg Markets weekdays at ten

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Speaker 8: am Eastern.

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Speaker 6: On Bloomberg dot Com, the iHeartRadio.

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Speaker 8: wherever you get your podcasts.

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Speaker 1: Jess Man, Paul Sweene here in the Bloomberg Interactor Brokers

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Speaker 1: a studio, want to get right for our next guest,

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Speaker 1: Eric Lynch. He's a managing director part of the investment

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Speaker 1: committee at Sharf Investments are based out there in the

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Speaker 1: West Coast in the Bay Area. Eric Joins is live

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Speaker 1: here on a Bloomberg and Active Brookers studio, Eric, thanks

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Speaker 1: so much for joining us here, boy, twenty four hours.

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Speaker 1: We've had a lot of ego data, a lot of

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Speaker 1: central banks to Federal Reserve yesterday, the ECB today, they're

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Speaker 1: both talking tough here. How do you guys in Shriff

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Speaker 1: Investments put it all together and think about what you

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Speaker 1: want to do for your clients.

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Speaker 9: Yeah, it's a great question. Thanks for having me, Paul.

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Speaker 9: You know, I think this is a great reminder that

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Speaker 9: as investors, it's important to remember to follow this signal,

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Speaker 9: not the noise, and signals earnings. Right, we're already in

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Speaker 9: a three quarter kind of tracking earnings recession. And so

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Speaker 9: even if the FED is going to go higher for

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Speaker 9: longer interest rates, and I think FED made it quite

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Speaker 9: I think the FED made it quite clear yesterday that

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Speaker 9: they will slow things down. So we think earnings are

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Speaker 9: going to be restricted going forward. So, you know, I

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Speaker 9: think it's time for an earnings playbook, if you will.

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Speaker 4: So I'm glad you brought that up, because especially if

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Speaker 4: you looked at the S and P five hundred last

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Speaker 4: year excluding earnings, or the energy sector in particular, when

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Speaker 4: you were looking at that, the Arenas recession actually began

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Speaker 4: in the second quarter of last year, So you kind

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Speaker 4: of the flip side of that, where energy sort of

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Speaker 4: masking some of the brighter times that other industries are

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Speaker 4: seeing there. So even when you were looking at that,

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Speaker 4: there's an expectation when you're excluding energy that we're going

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Speaker 4: to see double digit growth again for those other sectors.

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Speaker 4: Where are you in particular when it comes to some

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Speaker 4: of these sectors looking that sees more bright spots?

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Speaker 9: Yeah, no, good question. I think there's three ways to

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Speaker 9: kind of play this. One is to play this transition

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Speaker 9: of spending consumption from goods to services, right. I think

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Speaker 9: it's really interesting that investors are still a little slow

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Speaker 9: to the draw on this. Last month flash PMI came

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Speaker 9: out for services and manufacturing, and services blew it away.

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Speaker 9: Manufacturing was in a contraction, so as a leading indicator,

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Speaker 9: we're seeing that also on the ground level, right with

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Speaker 9: travel companies blowing away earnings and then meanwhile home depot

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Speaker 9: target goods companies reducing guidance. So this kind of revenge travel,

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Speaker 9: revenge servicing, elective surgeries. You saw the medical loss ratios

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Speaker 9: increasing for the insurance under riders yesterday because the older

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Speaker 9: folks are having revenge surgeries. And so that's a way

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Speaker 9: to get some writings growth for sure. Another way is

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Speaker 9: I think just stick to defensive companies with low GDP correlation.

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Speaker 9: The average lag between a recession and when the FED

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Speaker 9: pauses since nineteen eighty nine four instrate cycles has been

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Speaker 9: one year, and so I think it's a little premature

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Speaker 9: to bake in forecast for a big earnings ramp going forward.

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Speaker 9: And so I think it's still time to be kind

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Speaker 9: of defensive.

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Speaker 4: Interesting because then your recession take would be you're expecting

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Speaker 4: one to happen later this year.

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Speaker 9: It's hard to say. I think it's a full zerrand

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Speaker 9: to time it, as we've all been reminded this year,

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Speaker 9: right as we've been constantly looking around the corner for

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Speaker 9: this recession to occur.

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Speaker 4: But where would it be driven by? I mean, I

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Speaker 4: would think it have to be consumer spending, but we're

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Speaker 4: not necessarily seeing that happen yet. Even retail sales this

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Speaker 4: morning came in stronger than expected.

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Speaker 9: Yeah, no, they were very strong, and so that's definitely

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Speaker 9: the boldcase. I think the baarcase would be, you know,

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Speaker 9: I think the operative words in Howe's presser yesterday, where

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Speaker 9: people are suffering, right, and I think we need to

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Speaker 9: remind ourself that only I think the top ten percent

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Speaker 9: of wealth in this country owns eighty percent of stocks.

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Speaker 9: And so if you look at the FEDS mandates clearly

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Speaker 9: full employment or inflation, we're fully employed. So I think

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Speaker 9: power made it clear that price inflation they're going to

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Speaker 9: squash it. Historically, to answer your question, the only way

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Speaker 9: to do that is to increase you know, unemployment slow

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Speaker 9: things down, which obviously creates a slow down in consumption.

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Speaker 9: So historically, yeah, employment is what precipitates a recession. And

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Speaker 9: really the last general standing are in fact GDP growth

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Speaker 9: and employment.

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Speaker 1: All right, So in terms of a recession or earning's

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Speaker 1: playbook here earnings recession playbook, I kind of feel like

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Speaker 1: there still may be some earnings risk left in this market.

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Speaker 1: We still get the S and P five hundred. Earnings

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Speaker 1: are two hundred and twenty bucks roughly for this year.

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Speaker 1: Some people are saying it could be two hundred, maybe

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Speaker 1: even below that. So how do you guys think about

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Speaker 1: earnings recession and kind of how that influence is kind

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Speaker 1: of what stocks you look at.

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Speaker 9: Yeah, I think we're still think there's risks to the

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Speaker 9: downside to that two twenty five number. As you mentioned,

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Speaker 9: you know, the issue there is that baked into that

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Speaker 9: consensus is nine percent year via growth for Q four.

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Speaker 9: It just seems a little unrealistic. It's possible, for sure,

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Speaker 9: to your point, things were hanging in there, consumption wising

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Speaker 9: that today's consumer spending numbers where we tell the sales numbers,

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Speaker 9: were interesting. But nevertheless, you know, we're a little worried

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Speaker 9: about the impact the lagged effect of the monetary tightening,

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Speaker 9: the credit tightening specifically, is probably going to in our opinion,

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Speaker 9: starts going things down further as year progresses. The other

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Speaker 9: thing that I don't think is giving enough play and

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Speaker 9: investor kind of discussions is that the net profit margins

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Speaker 9: seysm P five hundred are still at all time highs,

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Speaker 9: and so there's been a structural increase the last twenty years.

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Speaker 9: It's been it's accounted for over half of ANNUIPS growth,

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Speaker 9: and so if you look at that, it was low

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Speaker 9: financial expenses, a global arbitrage of labor and supply chains,

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Speaker 9: low transportation. All those tailwes are now headwinds. And then

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Speaker 9: you had companies passing on price during the pandemic. So

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Speaker 9: we topped out at thirteen percent on net profit margins

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Speaker 9: during the pandemic. They're down to eleven baked in that

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Speaker 9: consensus number for next year is twelve percent, which should

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Speaker 9: still be twenty percent higher than the level they were

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Speaker 9: before the pandemic. So I think even independent of the economy,

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Speaker 9: what you're seeing on a micro level with companies guidance

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Speaker 9: is they keep referring to margins margins being kind of

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Speaker 9: constricted going forward.

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Speaker 4: So I think that that's the real issue as far

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Speaker 4: as especially when it comes to margins. Geenamoorton Adams at

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Speaker 4: Bloomberg Intelligence was saying, some of the pain may have

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Speaker 4: already been passed and potentially troughing in that first quarter

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Speaker 4: moving forward. I mean, what are you seeing and what

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Speaker 4: are you hearing from your clients on that end?

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Speaker 9: Yeah, I mean, just anecdotally, as investment managers managing a portfolio,

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Speaker 9: we're still seeing margin kind of compression or discussions with

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Speaker 9: our companies that are reporting on Q one, and none

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Speaker 9: of them are really saying, hey, you know, it looks

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Speaker 9: better at Q two Q three. Even wages. You know,

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Speaker 9: if you look at labor as percentage of GDP, it

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Speaker 9: really troughed a couple of years ago in terms of

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Speaker 9: a fifty year low, and it's still a point or

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Speaker 9: two percentage points lower than average. And so you see

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Speaker 9: that with the bargaining power of employees with low unemployment.

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Speaker 9: So I think, I think this wage pressure is still there,

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Speaker 9: and I think therefore that's what sixty percent or something

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Speaker 9: of operating expenses. So I don't think we're done.

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Speaker 1: All right, Eric, great stuff. I appreciate you stopping by.

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Speaker 10: Eric Lynch.

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Speaker 1: He's a managing director on the investment community of Sharf.

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Speaker 1: Sharf Investments based in Los Gatos, California, also the home

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Speaker 1: of Netflix, little stock out there. So neighbors there in

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Speaker 1: Los Gatos and kind of in the Bay are very

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Speaker 1: very cool area out there.

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Speaker 10: Appreciate it.

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Speaker 1: Looking at the markets right here, S and P five

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Speaker 1: hundred and a half of one percent, the NASDAK, I'm sorry,

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Speaker 1: the Nasdaq is up about half and one percent as well.

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Speaker 4: SMB five hundred on track for six consecutive days of games.

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Speaker 4: It beats longest streak since November twenty twenty one.

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Speaker 1: Running out a little bit too, it some of the

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Speaker 1: market folks are telling us, which is good news. It's

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Speaker 1: not just Apple and Amazon right pushing this.

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Speaker 8: Higher you're listening to the tape cans are live program

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Speaker 8: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,

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Speaker 8: the tune in app, Bloomberg dot Com, and the.

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Speaker 6: Bloomberg Business App.

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Speaker 8: You can also listen live on Amazon Alexa from our

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Speaker 8: flagship New York station Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 4: Just men.

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Speaker 1: Paul Swene here in the Bloomberg Interactive Brokers a studio.

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Speaker 1: Want to get right to our next guest, Eric Lynch.

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Speaker 1: He's a managing director, part of the investment community. It's

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Speaker 1: Sharf Investments are based out there in the West Coast

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Speaker 1: in the Bay Area. Eric Joins is live here in

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Speaker 1: on our Bloomberg Active Brokers studio. Eric, thanks so much

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Speaker 1: for joining us here. Boy, twenty four hours. We've had

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Speaker 1: a lot of EGO data, a lot of Central banks

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Speaker 1: to Federal Reserve yesterday, the ECB today. They're both talking

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Speaker 1: tough here. How do you guys in Sharf Investments put

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Speaker 1: it all together and think about what you want to

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Speaker 1: do for your clients.

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Speaker 9: Yeah, it's a great question. Thanks for having me, Paul.

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Speaker 9: You know, I think this is a great reminder that

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Speaker 9: as investors it's important to remember to follow this signal,

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Speaker 9: not the noise, and signals earnings. Right, We're already in

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Speaker 9: a three quarter kind of tracking earnings recession. And so

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Speaker 9: even if the FED is going to go higher for

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Speaker 9: longer interest rates, and I think FED made it quite

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Speaker 9: I think the FED made it quite clear yesterday that

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Speaker 9: they will slow things down. So we think earnings are

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Speaker 9: going to be restrict did going forward. So you know,

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Speaker 9: I think it's time for an earnings playbook, if you will.

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Speaker 4: So I'm glad you brought that up, because, especially if

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Speaker 4: you looked at the S and P five hundred last

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Speaker 4: year excluding earnings or the energy sector in particular, when

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Speaker 4: you were looking at that, the aarians recession actually began

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Speaker 4: in the second quarter of last year, so you kind

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Speaker 4: of the flip side of that, where energy sort of

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Speaker 4: masking some of the brighter times that other industries are

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Speaker 4: seeing there. So even when you were looking at that,

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Speaker 4: there's an expectation when you're excluding energy that we're going

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Speaker 4: to see double digit growth again for those other sectors.

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Speaker 4: Where are you in particular when it comes to some

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Speaker 4: of these sectors looking that sees more bright spots?

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Speaker 9: Yeah, no, good question. I think there's three ways to

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Speaker 9: kind of play this. One is to play this transition

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Speaker 9: of spending consumption from goods to services, right. I think

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Speaker 9: it's really interesting that investors are still a little slow

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Speaker 9: to the draw on this last month flash PMI came

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Speaker 9: out for services and manufacturing, and you know, services blew

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Speaker 9: it away. Manufacturing was in a contraction. So as a

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Speaker 9: leading indicator, we're seeing that also on the ground level,

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Speaker 9: right with travel companies blowing away earnings and then meanwhile

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Speaker 9: home depot target goods companies reducing guidance. So this kind

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Speaker 9: of revenge travel, revenge servicing, elective surgeries. You saw the

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Speaker 9: medical loss ratios increasing for the insurance under riders yesterday

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Speaker 9: because the older folks are having revenge surgeries, and so

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Speaker 9: that's the way to get some writings growth for sure.

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Speaker 9: Another way is I think just stick to defensive companies

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Speaker 9: with low GDP correlation. The average lag between a recession

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Speaker 9: and when the Fed pauses since nineteen eighty nine four

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Speaker 9: interest rate cycles has been one year, and so I

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Speaker 9: think it's a little premature to bake in forecasts for

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Speaker 9: a big earnings ramp going forward, and so I think

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Speaker 9: it's still time to be kind of defensive.

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Speaker 4: Interesting because then your recession take would be you're expecting

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Speaker 4: one to happen later this year.

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Speaker 9: It's hard to say. I think it's a full Zerran

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Speaker 9: to time it, as we've all been reminded this year, right,

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Speaker 9: as we've been constantly looking around the corner for this

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Speaker 9: recession to occur.

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Speaker 4: But where would it be driven by? I mean, I

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Speaker 4: would think it have to be consumer spending, but we're

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Speaker 4: not necessarily seeing that happen yet. Even retail sales this

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Speaker 4: morning came in stronger than expected.

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Speaker 9: Yeah, no, they were very strong, and so that's definitely

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Speaker 9: the boldcase. I think the baarcase would be. You know,

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Speaker 9: I think the operative words in Pale's presser yesterday where

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Speaker 9: people are suffering, right, and I think we need to

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Speaker 9: remind ourselves that only I think the top ten percent

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Speaker 9: of wealth in this country owns eighty percent of stocks.

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Speaker 9: And so if you look at the FEDS mandates clearly

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Speaker 9: full employment or inflation, we're fully employed. So I think

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Speaker 9: power made it clear that price inflation they're going to

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Speaker 9: squash it. And historically, to answer your question, the only

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Speaker 9: way to do that is to increase, you know, unemployment

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Speaker 9: slow things down, which obviously creates a slow down in consumption.

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Speaker 9: So historically, yeah, employment is what precipitates a recession, and

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Speaker 9: really the last general standing are in fact GDP growth

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Speaker 9: and employment.

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Speaker 1: All right, So in terms of a recession or earnings

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Speaker 1: playbook here earnings recession playbook, I kind of feel like

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Speaker 1: there still may be some earnings risk left in this market.

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Speaker 1: We still get the S and P five hundred earnings

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Speaker 1: are two hundred and twenty bucks roughly for this year.

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Speaker 1: Some people are saying it could be two hundred, maybe

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Speaker 1: even below that. So how do you guys think about

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Speaker 1: earnings recession and kind of how that influence is kind

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Speaker 1: of what stocks you look at.

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Speaker 9: Yeah, I think we're still thinking there's risks to the

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Speaker 9: downside to that two twenty five number. As you mentioned,

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Speaker 9: you know, the issue there is that baked into that

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Speaker 9: consensus is nine percent year of VIA growth for Q four.

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Speaker 9: It just seems a little unrealistic. It's possible, for sure,

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Speaker 9: to your point, things were hanging in there, consumption wising

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Speaker 9: that today's consumer spending numbers where we tell the sales

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Speaker 9: numbers were interesting, but nevertheless, you know, we're a little

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Speaker 9: wororried about the impact the lagged effect of the monetary tightening.

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Speaker 9: The credit tightening specifically, is probably going to, in our opinion,

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Speaker 9: start slowing things down further as year progresses. The other

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Speaker 9: thing that I don't think is given enough play and

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Speaker 9: investor kind of discussions is that the net profit margins

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Speaker 9: stetsm F five hundred are still at all time highs,

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Speaker 9: and so there's been a structural increase the last twenty years.

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Speaker 9: It's been it's accounted for over half of ANNOIPS growth,

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Speaker 9: and so if you look at that, it was low

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Speaker 9: financial expenses, a global arbitrage of labor and supply chains,

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Speaker 9: low transportation. All those tailwes are now headwinds. And then

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Speaker 9: you had companies passing on price during the pandemic. So

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Speaker 9: we topped out at thirteen percent on net profit margins

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Speaker 9: during the pandemic. They're down two eleven baked in that

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Speaker 9: consensus number for next year is twelve percent, which should

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Speaker 9: still be twenty percent higher than the level they were

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Speaker 9: before the pandemic. So I think even independent of the economy,

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Speaker 9: what you're seeing in on a micro level with companies

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Speaker 9: guidance is they keep referring to margins margins being kind

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Speaker 9: of constricted going forward. So I think that's the real

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Speaker 9: issue as.

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Speaker 4: Far as especially when it comes to margins. Genomorton Adams

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Speaker 4: at Bloomberg Intelligence was saying, some of the pain may

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Speaker 4: have already been passed and potentially troughing in that first

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Speaker 4: quarter moving forward. I mean, what are you seeing and

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Speaker 4: what are you hearing from your clients on that end?

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Speaker 9: Yeah, I mean, just anecdotally, as investment managers managing a portfolio,

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Speaker 9: we're still seeing margin kind of compression or discussions with

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Speaker 9: our companies that are reporting on Q one, and none

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Speaker 9: of them are really saying, hey, you know, it looks

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Speaker 9: better at Q two Q three.

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Speaker 6: Even wages.

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Speaker 9: You know, if you look at labor as a percentage

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Speaker 9: of GDP, it really troughed a couple of years ago

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Speaker 9: in terms of a fifty year low, and it's still

437
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Speaker 9: a point or two percentage points lower than average. And

438
00:22:53,560 --> 00:22:56,200
Speaker 9: so you see that with the bargaining power of employees

439
00:22:56,200 --> 00:22:59,800
Speaker 9: with low unemployment. So I think this wage pressure is

440
00:22:59,800 --> 00:23:03,080
Speaker 9: still there, and I think therefore that's what sixty percent

441
00:23:03,160 --> 00:23:07,240
Speaker 9: or something of operating expenses. So I don't think we're done.

442
00:23:07,640 --> 00:23:10,360
Speaker 1: All right, Eric, great stuff, appreciate you stopping buy Eric Lynch.

443
00:23:10,400 --> 00:23:13,639
Speaker 1: He's a managing director on the investment community of Sharf.

444
00:23:14,040 --> 00:23:18,080
Speaker 1: Sharf Investments based in Los Gatos, California, also the home

445
00:23:18,200 --> 00:23:22,879
Speaker 1: of Netflix, little stock out there. So neighbors there in

446
00:23:22,920 --> 00:23:25,160
Speaker 1: Los Gatos and kind of in the Bay are very

447
00:23:25,240 --> 00:23:26,440
Speaker 1: very cool area out there.

448
00:23:26,600 --> 00:23:27,080
Speaker 10: Appreciate it.

449
00:23:27,080 --> 00:23:28,880
Speaker 1: Looking at the markets right here, S and P five

450
00:23:28,960 --> 00:23:32,360
Speaker 1: hundred and a half of one percent the NASDAK, I'm sorry,

451
00:23:32,400 --> 00:23:34,119
Speaker 1: the Nasdaq is up about a half a one percent

452
00:23:34,920 --> 00:23:35,600
Speaker 1: as well.

453
00:23:35,800 --> 00:23:38,840
Speaker 4: SMB five hundred on track for six consecutive days of games.

454
00:23:38,840 --> 00:23:41,080
Speaker 4: It beats longest streak since November twenty twenty one.

455
00:23:41,200 --> 00:23:43,479
Speaker 1: Running out a little bit too with some of the

456
00:23:43,480 --> 00:23:45,480
Speaker 1: market folks are telling us, which is good news. It's

457
00:23:45,520 --> 00:23:47,639
Speaker 1: not just Apple and Amazon right pushing this higher.

458
00:23:48,680 --> 00:23:52,520
Speaker 8: You're listening to the Team Can't Live program Bloomberg Markets

459
00:23:52,560 --> 00:23:55,639
Speaker 8: weekdays at ten am Eastern on Bloomberg dot Com, the

460
00:23:55,720 --> 00:23:58,360
Speaker 8: iHeartRadio app and the Bloomberg Business app.

461
00:23:58,400 --> 00:24:00,879
Speaker 6: Or listen on demand wherever you get your podcast.

462
00:24:02,680 --> 00:24:04,920
Speaker 1: All right, let's get back to kind of what's been

463
00:24:05,000 --> 00:24:08,720
Speaker 1: the story for markets earlier the last twenty four thirty

464
00:24:08,760 --> 00:24:09,639
Speaker 1: six hours.

465
00:24:09,680 --> 00:24:11,840
Speaker 10: Decisions exactly, and then keep coming.

466
00:24:11,920 --> 00:24:14,680
Speaker 4: You mentioned we have the big Japan overnight.

467
00:24:14,760 --> 00:24:16,240
Speaker 1: Okay, so we'll keep an eye on that. But of

468
00:24:16,280 --> 00:24:21,239
Speaker 1: course we have that PBOCC ECB, lots of initials out there,

469
00:24:21,240 --> 00:24:22,600
Speaker 1: but we know what they are mean, and so does

470
00:24:22,640 --> 00:24:25,720
Speaker 1: our next guest, doctor Vania Starvrakeva. She is a professor

471
00:24:25,760 --> 00:24:29,960
Speaker 1: of economics at the London Business School. Professor, thanks so

472
00:24:30,080 --> 00:24:32,639
Speaker 1: much for joining us here. I mean again, can you

473
00:24:32,640 --> 00:24:34,960
Speaker 1: put in the context for us kind of how you

474
00:24:35,000 --> 00:24:38,040
Speaker 1: frame out what we've heard from the US Federal Reserve

475
00:24:38,440 --> 00:24:40,879
Speaker 1: and the European Central Bank over the last twenty four hours.

476
00:24:41,080 --> 00:24:43,320
Speaker 1: How does that impact your view?

477
00:24:43,960 --> 00:24:45,960
Speaker 11: So thank you so much for having me. It's always

478
00:24:46,000 --> 00:24:49,760
Speaker 11: a pleasure to participate. So I think what might happen

479
00:24:49,800 --> 00:24:52,520
Speaker 11: in the future is we might see an interesting divergence

480
00:24:52,600 --> 00:24:55,720
Speaker 11: potentially between the US and Europe. So we often tend

481
00:24:55,720 --> 00:24:57,920
Speaker 11: to see the US being the leader in terms of

482
00:24:57,960 --> 00:25:00,520
Speaker 11: like the beginning of the hiking cycle, the the word

483
00:25:00,560 --> 00:25:05,000
Speaker 11: the first to move, followed by banking and an ECB. Now,

484
00:25:05,080 --> 00:25:06,840
Speaker 11: usually you might expect that the US is going to

485
00:25:06,880 --> 00:25:08,639
Speaker 11: be the leader in terms of when they're going to

486
00:25:08,640 --> 00:25:13,040
Speaker 11: stop hiking. So the FED of course decided to pose

487
00:25:13,240 --> 00:25:17,600
Speaker 11: for essentially one round, and then there's quite a lot

488
00:25:17,600 --> 00:25:20,359
Speaker 11: of speculation that this is a bit unusual because there

489
00:25:20,359 --> 00:25:23,520
Speaker 11: were positive surprises regarding real GDP growth and unvariable, so

490
00:25:24,040 --> 00:25:27,000
Speaker 11: no one expected them to pose given that actually the

491
00:25:27,080 --> 00:25:30,600
Speaker 11: data on economic performance was better than expected. My opinion

492
00:25:30,680 --> 00:25:33,160
Speaker 11: is that actually what might be happening is we're seeing

493
00:25:33,160 --> 00:25:37,040
Speaker 11: potentially the beginning of the FAT preparing us for a

494
00:25:37,119 --> 00:25:40,400
Speaker 11: higher inflation target. So that is not something that I

495
00:25:40,480 --> 00:25:43,399
Speaker 11: here discussed a lot, but all central banks acknowledging that

496
00:25:43,480 --> 00:25:45,480
Speaker 11: is going to take at least two years to go

497
00:25:45,600 --> 00:25:48,880
Speaker 11: back to the inflation target. I don't believe that necessarily

498
00:25:48,920 --> 00:25:50,720
Speaker 11: they would actually want to go back to two percent.

499
00:25:50,800 --> 00:25:54,600
Speaker 11: I think the FED might be preparing markets to probably

500
00:25:54,600 --> 00:25:57,480
Speaker 11: a higher inflation target. Now it will be interesting because

501
00:25:57,480 --> 00:26:00,280
Speaker 11: easy b if ecipit decides to change the inflation target,

502
00:26:00,320 --> 00:26:03,760
Speaker 11: it will be significantly harder. Given the history of Germany,

503
00:26:04,560 --> 00:26:08,280
Speaker 11: we all know that Germany hates inflation, so we might

504
00:26:08,320 --> 00:26:12,200
Speaker 11: see interesting divergence in policymaking, which is quite unusual these

505
00:26:12,280 --> 00:26:15,640
Speaker 11: days across the large central banks, and I think that's

506
00:26:15,680 --> 00:26:17,080
Speaker 11: something that one should keep an eye on.

507
00:26:17,400 --> 00:26:20,080
Speaker 4: Is the diversion also because of the way that our

508
00:26:20,359 --> 00:26:23,119
Speaker 4: economy is structured quite differently when you think of it

509
00:26:23,240 --> 00:26:27,159
Speaker 4: more services driven than say, how economies in Europe are.

510
00:26:28,720 --> 00:26:31,359
Speaker 11: Also the majority of the economies in Europe are also

511
00:26:31,400 --> 00:26:34,560
Speaker 11: serve is driven as well. Now what's different, of course,

512
00:26:34,720 --> 00:26:37,679
Speaker 11: is that with ECB we have many different business cycles.

513
00:26:37,880 --> 00:26:40,119
Speaker 11: So what we're seeing is that inflation, for example, is

514
00:26:40,320 --> 00:26:42,879
Speaker 11: falling faster in some parts of Europe where the label

515
00:26:42,920 --> 00:26:46,879
Speaker 11: markets are essentially less tight. So Germany, the course topr

516
00:26:46,920 --> 00:26:50,520
Speaker 11: inflation is still higher than many southern European economies. Now

517
00:26:50,560 --> 00:26:52,960
Speaker 11: what was interesting is that, you know, during the zero

518
00:26:53,160 --> 00:26:56,520
Speaker 11: or bound period, effectively some people blame the CIP that

519
00:26:56,560 --> 00:26:58,560
Speaker 11: they're putting too high of a weight on the German

520
00:26:58,600 --> 00:27:00,919
Speaker 11: economy relative to the rest of the year arozone, the

521
00:27:00,960 --> 00:27:04,159
Speaker 11: thing might be happening now, So essentially it might be

522
00:27:04,200 --> 00:27:06,320
Speaker 11: the case that sat in Europe and other parts of

523
00:27:06,600 --> 00:27:10,439
Speaker 11: the Eurozone now don't necessarily need as much tightening. But

524
00:27:10,560 --> 00:27:14,439
Speaker 11: we might see that ECB prioritizes Germany more, not just

525
00:27:14,480 --> 00:27:18,119
Speaker 11: because of the size of the country. So I think

526
00:27:18,280 --> 00:27:21,160
Speaker 11: it will be interesting to see to what extent ECB

527
00:27:21,359 --> 00:27:23,920
Speaker 11: is going to continue with its stands on we're really

528
00:27:24,000 --> 00:27:25,879
Speaker 11: tough on inflation, we have to go back down to

529
00:27:25,880 --> 00:27:29,360
Speaker 11: two percent or they might become a little bit more

530
00:27:29,359 --> 00:27:31,440
Speaker 11: lineent and consider high inflation target.

531
00:27:31,119 --> 00:27:35,240
Speaker 1: As zone and professor to the extent that the Fed does,

532
00:27:36,200 --> 00:27:39,199
Speaker 1: you know, maybe lift their inflation target going forward. That

533
00:27:39,200 --> 00:27:41,600
Speaker 1: would be a big change for them. Is that would

534
00:27:41,680 --> 00:27:43,919
Speaker 1: that be an incredibility issue for them?

535
00:27:44,280 --> 00:27:46,280
Speaker 11: It will, But to be honest, they haven't delivered the

536
00:27:46,320 --> 00:27:48,439
Speaker 11: target in a very long time, right, So here the

537
00:27:48,480 --> 00:27:51,040
Speaker 11: trade off is we keep promising something that we haven't

538
00:27:51,080 --> 00:27:53,400
Speaker 11: delivered for for many years. So even during the zero

539
00:27:53,560 --> 00:27:56,399
Speaker 11: or bound, inflation was below the target. Yep, that's why

540
00:27:56,240 --> 00:28:00,600
Speaker 11: they moved towards average inflation targeting. I think there are

541
00:28:00,720 --> 00:28:02,119
Speaker 11: I mean, we know that there are a lot of

542
00:28:02,160 --> 00:28:06,360
Speaker 11: theoretical reasons why high inflation target is beneficial. So for example,

543
00:28:06,359 --> 00:28:08,760
Speaker 11: we knew that during the zero Laura bound, a lot

544
00:28:08,800 --> 00:28:12,160
Speaker 11: of economists, including only via blanchepe Call, the chief economist

545
00:28:12,200 --> 00:28:15,879
Speaker 11: of the kind of essentially was pushing towards the inflation

546
00:28:15,960 --> 00:28:18,440
Speaker 11: target of four percent. The reason why that's the case

547
00:28:18,520 --> 00:28:20,560
Speaker 11: is because if you stucky the zero Laura bound, this

548
00:28:20,680 --> 00:28:23,359
Speaker 11: is going to give you real rates of minus four percent, right,

549
00:28:23,800 --> 00:28:26,439
Speaker 11: so it could really help stimulate growth. So there are

550
00:28:26,480 --> 00:28:30,000
Speaker 11: many big benefits to high inflation target, and I think actually,

551
00:28:30,000 --> 00:28:32,159
Speaker 11: if there is a time to change the inflation target,

552
00:28:32,640 --> 00:28:35,320
Speaker 11: it might be better than pretending that we're going down

553
00:28:35,359 --> 00:28:38,080
Speaker 11: to two percent and being above two percent for two

554
00:28:38,200 --> 00:28:41,480
Speaker 11: three years. I think it's more dangerous in terms of

555
00:28:41,520 --> 00:28:45,640
Speaker 11: what we're seeing. We're already worried about wage inflation expectations

556
00:28:45,640 --> 00:28:48,200
Speaker 11: getting un anchored. Actually the UK is the worst in

557
00:28:48,280 --> 00:28:50,800
Speaker 11: terms of wage inflation expectations. So as you saw the

558
00:28:50,840 --> 00:28:55,640
Speaker 11: private sector, wage inflation was particularly high in the UK.

559
00:28:56,280 --> 00:28:59,040
Speaker 11: So I feel markets are starting not to believe the

560
00:28:59,120 --> 00:29:01,440
Speaker 11: story that we're going to die to two percent. So

561
00:29:01,600 --> 00:29:03,720
Speaker 11: I believe that actually it might be a good time

562
00:29:03,720 --> 00:29:05,840
Speaker 11: to adjust the target to something more reasonable.

563
00:29:06,280 --> 00:29:08,080
Speaker 4: What do you think would be more reasonable?

564
00:29:09,400 --> 00:29:12,800
Speaker 11: So four percent between three percent I think probably is

565
00:29:12,840 --> 00:29:13,280
Speaker 11: more realistic.

566
00:29:13,920 --> 00:29:17,320
Speaker 4: That's for the US better reserve, So.

567
00:29:17,400 --> 00:29:19,840
Speaker 11: Yes, so for the US, but technically the UK has

568
00:29:19,880 --> 00:29:22,520
Speaker 11: a bigger problem, right, So in terms of the data,

569
00:29:22,560 --> 00:29:24,600
Speaker 11: the UK is the worst than the furthest away from

570
00:29:24,640 --> 00:29:27,600
Speaker 11: the target. So I wouldn't be surprised that the UK

571
00:29:27,720 --> 00:29:31,040
Speaker 11: is going to also potentially entertain the idea of high

572
00:29:31,120 --> 00:29:33,760
Speaker 11: inflation target, but they're going to wait for the US.

573
00:29:33,920 --> 00:29:37,400
Speaker 11: I don't believe that any country is going to even

574
00:29:37,680 --> 00:29:40,040
Speaker 11: entertain the idea of phrasing the inflation target unless the

575
00:29:40,120 --> 00:29:40,720
Speaker 11: US does it.

576
00:29:41,480 --> 00:29:45,680
Speaker 1: So, Professor, We've spoken to some European and UK fund

577
00:29:45,760 --> 00:29:49,200
Speaker 1: managers and strategists this morning about the ECB's action and

578
00:29:49,240 --> 00:29:52,360
Speaker 1: a lot of folks are just kind of exacerbated, exacerbated

579
00:29:52,400 --> 00:29:56,000
Speaker 1: with the ec being to the extent that they feel

580
00:29:56,000 --> 00:29:58,800
Speaker 1: like the ECB is pushing the euro Zone into recession

581
00:29:59,800 --> 00:30:02,800
Speaker 1: or a deeper recession or more prolonged recession. How do

582
00:30:02,800 --> 00:30:03,520
Speaker 1: you view that risk?

583
00:30:04,400 --> 00:30:06,680
Speaker 11: But the problem again is coming from the heterogenetica across

584
00:30:06,720 --> 00:30:09,720
Speaker 11: countries and what we mentioned that Germany receives the higher

585
00:30:09,720 --> 00:30:13,640
Speaker 11: weight Germany, So the history of CB is effectively it

586
00:30:13,840 --> 00:30:16,440
Speaker 11: stands on the shoulders of the Deutsche Bundesbank that is

587
00:30:16,520 --> 00:30:18,400
Speaker 11: known to be very tough on inflation, which is coming

588
00:30:18,400 --> 00:30:21,239
Speaker 11: from the World Wars in Germany where they had when

589
00:30:21,280 --> 00:30:25,800
Speaker 11: they had higher inflation, so their political economy reasons why

590
00:30:25,840 --> 00:30:27,960
Speaker 11: it would be hard for CIP not to be tough

591
00:30:27,960 --> 00:30:30,560
Speaker 11: on inflation. And Germany receives a very high weight here

592
00:30:30,800 --> 00:30:36,160
Speaker 11: and core CPI inflation is high for Germany. Well, of

593
00:30:36,200 --> 00:30:38,920
Speaker 11: course you're correct that if you take the overall performance

594
00:30:39,000 --> 00:30:43,720
Speaker 11: numbers of the Eurozone, that might appear that the economy

595
00:30:43,720 --> 00:30:46,920
Speaker 11: doesn't need as much tightening, but here is seeing political

596
00:30:46,960 --> 00:30:48,080
Speaker 11: economy issues also at playing.

597
00:30:48,120 --> 00:30:50,840
Speaker 4: I feel when it comes to some of these Southern

598
00:30:51,080 --> 00:30:54,920
Speaker 4: European countries that are highly indebted, which ones in particular

599
00:30:55,000 --> 00:30:57,520
Speaker 4: stand out to you as far as having a tough

600
00:30:57,560 --> 00:31:01,120
Speaker 4: time moving forward when it comes to that growth.

601
00:31:02,680 --> 00:31:06,840
Speaker 11: I think the usual corporate right now is Italy again

602
00:31:07,080 --> 00:31:10,640
Speaker 11: primarily for sovereign that sustainability were in a very uncomfortable situation,

603
00:31:10,760 --> 00:31:13,560
Speaker 11: whereas it be is still purchasing Italian debt while selling

604
00:31:13,560 --> 00:31:16,000
Speaker 11: German debt right doing quantitative titling with respect to the

605
00:31:16,000 --> 00:31:18,200
Speaker 11: German sovereign that but quantitative vision with respect to the

606
00:31:18,240 --> 00:31:21,200
Speaker 11: Italian that I feel that it's a very uncomfortable situation

607
00:31:21,320 --> 00:31:24,800
Speaker 11: the sovereign. The sustainability issue is not resolved with respect

608
00:31:24,800 --> 00:31:27,360
Speaker 11: to Italy, and I feel this is still an elephant

609
00:31:27,440 --> 00:31:30,040
Speaker 11: in the room with respect to the Eurozone that there

610
00:31:30,080 --> 00:31:32,520
Speaker 11: has to be a solution for because we can't have

611
00:31:32,640 --> 00:31:35,080
Speaker 11: easy b be the marginal order of Italian government debt

612
00:31:35,120 --> 00:31:37,320
Speaker 11: and there is still one hundred and fifty percent of

613
00:31:37,400 --> 00:31:40,000
Speaker 11: the two GDP, so the number is very large, and

614
00:31:40,040 --> 00:31:41,600
Speaker 11: I think it is itb is still struggling with that,

615
00:31:41,760 --> 00:31:43,840
Speaker 11: and I don't believe they have found a proper solution

616
00:31:43,920 --> 00:31:44,240
Speaker 11: for it.

617
00:31:44,760 --> 00:31:47,120
Speaker 1: Professor back here in the US, are you of the

618
00:31:47,120 --> 00:31:50,040
Speaker 1: opinion that this federal Reserve will raise interest rates? And

619
00:31:50,080 --> 00:31:52,400
Speaker 1: if this year? And if so, but maybe how many

620
00:31:52,400 --> 00:31:53,600
Speaker 1: times and what degree?

621
00:31:55,840 --> 00:31:58,280
Speaker 11: So I think they post in order also to see

622
00:31:58,280 --> 00:32:00,160
Speaker 11: what is going to happen to create a contraction. So

623
00:32:00,200 --> 00:32:02,520
Speaker 11: we saw that the banking sect that lost about one

624
00:32:02,560 --> 00:32:06,640
Speaker 11: trillion of deposits, and in total there's about seventeen trillion

625
00:32:06,720 --> 00:32:10,200
Speaker 11: in the whole banking industry. So given that these primarily

626
00:32:10,280 --> 00:32:14,360
Speaker 11: regional small banks that lend a lot to small and

627
00:32:14,400 --> 00:32:16,640
Speaker 11: medium enterprises, they want to see what the impact on

628
00:32:16,760 --> 00:32:19,320
Speaker 11: employment will be. So small and medium enterprises are the

629
00:32:19,400 --> 00:32:23,400
Speaker 11: main employer effectively in the US, so to the extent

630
00:32:23,440 --> 00:32:26,520
Speaker 11: that there might be a create contraction in terms of

631
00:32:26,560 --> 00:32:28,600
Speaker 11: small and medium enterprises, they want to see how it's

632
00:32:28,600 --> 00:32:33,360
Speaker 11: going to play out at this point. Now, again looking

633
00:32:33,400 --> 00:32:36,840
Speaker 11: at the numbers, they technically shouldn't have posed if truly

634
00:32:36,840 --> 00:32:39,000
Speaker 11: they were data driven, right, so they discussed that their

635
00:32:39,080 --> 00:32:42,560
Speaker 11: data driven. So the action was a bit surprising to

636
00:32:42,600 --> 00:32:45,000
Speaker 11: me to be honest, The only way I can explain

637
00:32:45,080 --> 00:32:48,480
Speaker 11: it is that they might be tinkering with the idea

638
00:32:48,560 --> 00:32:51,440
Speaker 11: of moving the inflation target and just admitting that they

639
00:32:51,440 --> 00:32:53,200
Speaker 11: will not be easily be able to go down to

640
00:32:53,240 --> 00:32:55,200
Speaker 11: two percent or come up with a regime that is

641
00:32:55,240 --> 00:32:57,680
Speaker 11: much more flexible rather than just a well different target.

642
00:32:58,080 --> 00:33:00,720
Speaker 1: All Right, doctor, thank you very much for giving us

643
00:33:00,720 --> 00:33:03,280
Speaker 1: some of your time. We really appreciate it. Doctor Vanya

644
00:33:03,920 --> 00:33:07,440
Speaker 1: rick stop Rakava, professor of economics at the London Business School,

645
00:33:07,760 --> 00:33:10,040
Speaker 1: joining us. We really appreciate getting some of her time

646
00:33:10,080 --> 00:33:12,480
Speaker 1: talking about kind of the action we've seen over the

647
00:33:12,560 --> 00:33:14,760
Speaker 1: last twenty four hours with the first of Federal Reserve

648
00:33:14,800 --> 00:33:15,400
Speaker 1: and now the ECB.

649
00:33:15,520 --> 00:33:17,760
Speaker 6: Today you're listening to.

650
00:33:17,840 --> 00:33:21,320
Speaker 8: The tape Cat's are live program Bloomberg Markets weekdays at

651
00:33:21,360 --> 00:33:24,440
Speaker 8: ten am Eastern on Bloomberg Radio, the tune in app,

652
00:33:24,520 --> 00:33:25,400
Speaker 8: Bloomberg dot.

653
00:33:25,320 --> 00:33:27,040
Speaker 6: Com, and the Bloomberg Business App.

654
00:33:27,120 --> 00:33:29,920
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655
00:33:29,960 --> 00:33:34,320
Speaker 8: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

656
00:33:36,400 --> 00:33:39,440
Speaker 1: Let's look retail sales. We get some retail sales reported today.

657
00:33:39,520 --> 00:33:41,320
Speaker 1: You know they were less than the prior month, but

658
00:33:41,360 --> 00:33:43,240
Speaker 1: a little bit better than the market.

659
00:33:43,080 --> 00:33:45,240
Speaker 4: Was looking for a strong consumer I think so.

660
00:33:45,400 --> 00:33:47,280
Speaker 1: I mean, it still seems pretty solid out there. But

661
00:33:47,640 --> 00:33:50,320
Speaker 1: our next guest is a real expert on this, Marie Driscoll,

662
00:33:50,400 --> 00:33:53,360
Speaker 1: luxury retail analyst at Core Site Research. Marie, what's your

663
00:33:53,400 --> 00:33:56,720
Speaker 1: takeaway from the retail sales data we got today and

664
00:33:56,800 --> 00:33:59,240
Speaker 1: then maybe extrapolate that out there to what you're hearing

665
00:33:59,240 --> 00:34:01,040
Speaker 1: and seeing from some of the other retailers.

666
00:34:01,960 --> 00:34:02,200
Speaker 10: Sure.

667
00:34:02,400 --> 00:34:04,400
Speaker 12: Sure, thank you for having me.

668
00:34:04,520 --> 00:34:05,440
Speaker 11: It's great to be here.

669
00:34:07,080 --> 00:34:10,719
Speaker 13: The numbers were were great. Really, they came in line

670
00:34:10,760 --> 00:34:15,640
Speaker 13: with expectations. The consumer is feeling constrained. We really didn't

671
00:34:15,640 --> 00:34:18,919
Speaker 13: see any surprise. Clothing was flat or you know, off

672
00:34:19,719 --> 00:34:24,880
Speaker 13: off to twenty basis points versus a year ago. Department

673
00:34:24,960 --> 00:34:29,200
Speaker 13: stores pulled down general merchandise general merchandise stores grew up

674
00:34:29,280 --> 00:34:34,080
Speaker 13: two percent. The real winner this this month and really

675
00:34:34,239 --> 00:34:37,200
Speaker 13: year to date has been health and beauty that showed

676
00:34:37,200 --> 00:34:40,359
Speaker 13: a solid seven point eight percent game year over year.

677
00:34:41,000 --> 00:34:46,160
Speaker 13: And this just goes to really, there's the lipstick effect

678
00:34:46,200 --> 00:34:47,560
Speaker 13: if you want to look at look at it.

679
00:34:47,600 --> 00:34:48,960
Speaker 4: That as an economic indicator.

680
00:34:49,960 --> 00:34:50,600
Speaker 5: I love that one.

681
00:34:51,880 --> 00:34:55,440
Speaker 13: So, but beauty is self care, it's an accessible luxury.

682
00:34:55,680 --> 00:34:58,680
Speaker 13: It changes how we feel, and it has great utility.

683
00:34:58,760 --> 00:35:00,759
Speaker 4: You use it daily, So think of that as a

684
00:35:00,840 --> 00:35:02,759
Speaker 4: staple instead of a discretionary.

685
00:35:04,120 --> 00:35:06,480
Speaker 13: Well, you know, I think that the way we define

686
00:35:06,520 --> 00:35:08,880
Speaker 13: discretionary and staple is a lot in the eyes of

687
00:35:08,960 --> 00:35:12,520
Speaker 13: the user. When I look at teen retailers, it's like

688
00:35:13,040 --> 00:35:15,759
Speaker 13: you and I might say this is discretionary. For them,

689
00:35:15,840 --> 00:35:19,440
Speaker 13: it's an absolute must have. There's just no discretion about it.

690
00:35:20,160 --> 00:35:23,520
Speaker 13: So it really depends on whose money it is, you know.

691
00:35:23,840 --> 00:35:26,680
Speaker 13: But you know, beauty shares a lot of the same

692
00:35:26,800 --> 00:35:30,240
Speaker 13: qualities as luxury, excepts it's at a much lower price point.

693
00:35:30,640 --> 00:35:32,479
Speaker 12: So beauty did really well.

694
00:35:33,719 --> 00:35:36,640
Speaker 13: You know, clothing, when you look at what people are

695
00:35:36,760 --> 00:35:41,359
Speaker 13: spending on there, they're really reducing on clothing, Furniture down

696
00:35:41,480 --> 00:35:45,440
Speaker 13: dramatically at six point four percent year over year, and electronics,

697
00:35:45,520 --> 00:35:49,360
Speaker 13: no surprise, down five percent. Consumers had really spent on

698
00:35:49,520 --> 00:35:53,560
Speaker 13: those items during the pandemic and are looking to do

699
00:35:54,280 --> 00:35:57,040
Speaker 13: are really looking to be more social and out there.

700
00:35:58,160 --> 00:36:02,320
Speaker 13: Food and services, which are in did in this retail

701
00:36:02,400 --> 00:36:05,880
Speaker 13: sales report. We're up to the strongest year over year

702
00:36:05,920 --> 00:36:10,360
Speaker 13: at eight percent. A lot of that's inflation, but people continued,

703
00:36:10,800 --> 00:36:14,200
Speaker 13: people want experiences, want to be out, want to be social,

704
00:36:14,239 --> 00:36:19,280
Speaker 13: they're spending there. Another call out Worth mentioned like general

705
00:36:19,400 --> 00:36:22,960
Speaker 13: merchandise stores up two percent year over year. We think

706
00:36:23,040 --> 00:36:26,320
Speaker 13: it was, you know, really stronger than that at companies

707
00:36:26,400 --> 00:36:29,920
Speaker 13: like Walmart, which are benefiting from all the essentials that

708
00:36:30,040 --> 00:36:34,000
Speaker 13: they sell, the food that they sell along with selected merchandise.

709
00:36:34,360 --> 00:36:37,360
Speaker 13: The fact that more people are coming into their stores

710
00:36:37,800 --> 00:36:44,400
Speaker 13: than pre COVID because they captured more mind share during COVID. Frankly,

711
00:36:44,760 --> 00:36:48,880
Speaker 13: can they hold on to that higher income customer in

712
00:36:49,000 --> 00:36:50,080
Speaker 13: a post COVID world?

713
00:36:50,160 --> 00:36:52,359
Speaker 12: And I think that they're doing their best to try

714
00:36:52,400 --> 00:36:52,800
Speaker 12: and do that.

715
00:36:53,280 --> 00:36:56,400
Speaker 4: It's interesting. I was speaking with a portfolio manager recently

716
00:36:56,480 --> 00:36:58,920
Speaker 4: who was talking about how stocks like stay Lauder he

717
00:36:58,960 --> 00:37:00,560
Speaker 4: wasn't going to get rid of because he felt like

718
00:37:00,760 --> 00:37:02,960
Speaker 4: they were recessioned for you knew, his daughters, his wife,

719
00:37:02,960 --> 00:37:04,840
Speaker 4: We're still going to buy those products. I wanted to

720
00:37:04,880 --> 00:37:09,480
Speaker 4: pick your brain about the latest retail earning season, especially

721
00:37:09,480 --> 00:37:11,200
Speaker 4: since we just got this retail sales data. I mean,

722
00:37:11,200 --> 00:37:14,440
Speaker 4: we had companies like Macy's that cut their outlook just

723
00:37:14,520 --> 00:37:16,520
Speaker 4: because of what they were seeing with the demandrens. But

724
00:37:16,560 --> 00:37:19,480
Speaker 4: then you look at Lululemon, which is very niche at

725
00:37:19,640 --> 00:37:22,959
Speaker 4: leisure and a bit expensive if you were thinking about

726
00:37:23,000 --> 00:37:25,760
Speaker 4: some of their products, and they still had an opposite

727
00:37:25,800 --> 00:37:27,719
Speaker 4: kind of take, and we're seeing consumers go in. So

728
00:37:28,280 --> 00:37:30,960
Speaker 4: what exactly does that tell us about the economy right now?

729
00:37:31,680 --> 00:37:34,640
Speaker 13: So Lululemon is a retailer, but it's a brand, and

730
00:37:34,719 --> 00:37:38,320
Speaker 13: it's a life style and it's the kind of like

731
00:37:38,520 --> 00:37:43,240
Speaker 13: in the last twenty years, it has become increasingly okay

732
00:37:43,840 --> 00:37:47,480
Speaker 13: to wear yoga pants and the comfortable pants that.

733
00:37:47,520 --> 00:37:51,319
Speaker 12: They that they make with the pandemic all day long,

734
00:37:51,960 --> 00:37:52,319
Speaker 12: right and.

735
00:37:53,120 --> 00:37:57,840
Speaker 13: We're wearing them from the workout routine, to the coffee

736
00:37:57,880 --> 00:38:01,799
Speaker 13: in the afternoon to make you put on a nice top,

737
00:38:01,880 --> 00:38:03,040
Speaker 13: and to the theater at night.

738
00:38:03,400 --> 00:38:07,600
Speaker 12: So like Lulu Lemon has become a backbone of many

739
00:38:07,680 --> 00:38:08,560
Speaker 12: people's closets.

740
00:38:08,920 --> 00:38:12,000
Speaker 13: And frankly, it's not just an American brand, it's a

741
00:38:12,040 --> 00:38:15,839
Speaker 13: global brand. There's incredible pent up demand in China for Lululemon,

742
00:38:16,160 --> 00:38:18,400
Speaker 13: so there's legs for that company.

743
00:38:19,080 --> 00:38:23,600
Speaker 12: But again, it's partly lifestyle. And Macy's is very much

744
00:38:24,600 --> 00:38:27,840
Speaker 12: you know, it's the middle of the mall the middle.

745
00:38:28,440 --> 00:38:31,640
Speaker 13: It's a mass it's not mass market, it's a department store,

746
00:38:31,719 --> 00:38:35,879
Speaker 13: but but it's for Middle America where there where there

747
00:38:36,080 --> 00:38:39,680
Speaker 13: is constraint, Lulu Lemon might be that little bit of

748
00:38:39,719 --> 00:38:41,160
Speaker 13: a higher income consumer.

749
00:38:42,280 --> 00:38:45,239
Speaker 12: Frankly, though, across the board, everybody is.

750
00:38:46,040 --> 00:38:48,880
Speaker 13: You know, from the data, we're seeing people are impacted

751
00:38:48,920 --> 00:38:51,919
Speaker 13: by inflation, and they're being choiceful as they.

752
00:38:51,880 --> 00:38:54,880
Speaker 12: Make their spending choice, as they make their purchase choices.

753
00:38:55,480 --> 00:38:57,279
Speaker 1: Hey, Marie can talk to us about kind of just

754
00:38:57,360 --> 00:38:59,480
Speaker 1: the state of luxury right now. I'm just guessing that

755
00:38:59,640 --> 00:39:02,279
Speaker 1: the inflation that we're all feeling out there, it's probably

756
00:39:02,360 --> 00:39:05,359
Speaker 1: not impacting our good friends up at the luxury level.

757
00:39:05,400 --> 00:39:07,200
Speaker 1: What are you seeing and hearing from those companies?

758
00:39:08,040 --> 00:39:09,160
Speaker 12: You know, it's mixed.

759
00:39:09,600 --> 00:39:14,479
Speaker 13: Some luxury companies cannot meet their demand, and that would

760
00:39:14,480 --> 00:39:18,200
Speaker 13: be an Armez and a Louis Vuitton, but many other

761
00:39:19,600 --> 00:39:27,920
Speaker 13: brands are struggling with this. The American consumer who was

762
00:39:28,040 --> 00:39:35,359
Speaker 13: shopping poor luxury during COVID attracted new consumers, younger consumers.

763
00:39:35,640 --> 00:39:39,560
Speaker 13: People luxury provides an experience, and when there were no

764
00:39:39,800 --> 00:39:42,960
Speaker 13: experiences to be had, many people bought a hand egg

765
00:39:43,040 --> 00:39:47,960
Speaker 13: to feel better, an Armez cuff, and you got new

766
00:39:48,040 --> 00:39:52,040
Speaker 13: people into luxury brands, and they're feeling a pinch this

767
00:39:52,239 --> 00:39:53,120
Speaker 13: year with inflation.

768
00:39:54,280 --> 00:39:57,760
Speaker 12: You'd like to think that luxury is sticky and people

769
00:39:57,840 --> 00:39:59,239
Speaker 12: will continue to want it.

770
00:39:59,600 --> 00:40:02,759
Speaker 13: I don't think that you're going to see the kind

771
00:40:02,800 --> 00:40:06,000
Speaker 13: of growth that we experienced in twenty one and twenty

772
00:40:06,080 --> 00:40:11,200
Speaker 13: two domestically, and you are seeing as people return to travel,

773
00:40:11,600 --> 00:40:17,720
Speaker 13: luxury spending will diversify. Americans spent a lot on luxury

774
00:40:18,360 --> 00:40:21,400
Speaker 13: in Europe last summer because they were able to travel

775
00:40:21,400 --> 00:40:27,640
Speaker 13: again and the strength of the dollar. So luxury continues

776
00:40:27,680 --> 00:40:30,200
Speaker 13: to better benefit from the one percent, the top ten

777
00:40:30,280 --> 00:40:34,240
Speaker 13: percent across the board. Except for that top one percent,

778
00:40:34,480 --> 00:40:39,160
Speaker 13: people are impacted by inflation. It's changing their luxury spend.

779
00:40:39,600 --> 00:40:43,200
Speaker 13: Some brands are not impacted at all, but in the aggregate,

780
00:40:43,360 --> 00:40:45,760
Speaker 13: luxury is impacting all right, Marie.

781
00:40:45,560 --> 00:40:47,520
Speaker 1: Thank you so much for joining us. Always appreciate getting

782
00:40:47,840 --> 00:40:50,839
Speaker 1: the lay of the retail land with You've got great

783
00:40:50,880 --> 00:40:54,040
Speaker 1: experience in the space and great insights. Marie Driscoll, she's

784
00:40:54,080 --> 00:40:57,839
Speaker 1: a luxury retail analyst at Coresites Research and she's been

785
00:40:57,880 --> 00:40:59,239
Speaker 1: doing that for a long time.

786
00:41:00,000 --> 00:41:03,320
Speaker 8: Listening to the tape, can's our live program, Bloomberg Markets

787
00:41:03,400 --> 00:41:06,200
Speaker 8: weekdays at ten am Eastern on Bloomberg Radio.

788
00:41:06,400 --> 00:41:09,080
Speaker 6: The tune in app Bloomberg dot Com and the Bloomberg

789
00:41:09,160 --> 00:41:09,719
Speaker 6: Business App.

790
00:41:09,800 --> 00:41:12,600
Speaker 8: You can also listen live on Amazon Alexa from our

791
00:41:12,640 --> 00:41:17,320
Speaker 8: flagship New York station Just say Alexa playing Bloomberg eleven thirty.

792
00:41:18,280 --> 00:41:18,719
Speaker 7: I about this.

793
00:41:18,880 --> 00:41:21,680
Speaker 1: Were good friends up in Connecticut. Connecticut just agreed to

794
00:41:21,840 --> 00:41:26,400
Speaker 1: a budget signing the largest marginal tax cut rate in

795
00:41:26,640 --> 00:41:29,800
Speaker 1: Connecticut history and the first tax cut for Connecticut in

796
00:41:29,920 --> 00:41:31,959
Speaker 1: three decades. I'm sure my buddies up there are happy

797
00:41:32,000 --> 00:41:34,200
Speaker 1: about that. Let's get the latest on all things the

798
00:41:34,320 --> 00:41:36,920
Speaker 1: state of the state in Connecticut with Ned Lamont. He's

799
00:41:36,960 --> 00:41:39,120
Speaker 1: the governor of the State of Connecticut. Governor, thanks so

800
00:41:39,200 --> 00:41:43,160
Speaker 1: much for joining us. Talk to us about this budget

801
00:41:43,320 --> 00:41:48,040
Speaker 1: and kind of the tax cuts you're getting across in Connecticut.

802
00:41:50,120 --> 00:41:52,120
Speaker 10: Yeah, I can have to do the ball Look, I

803
00:41:52,160 --> 00:41:54,040
Speaker 10: come out of the business world. People like a little

804
00:41:54,080 --> 00:41:55,960
Speaker 10: bit of certainty. They don't want to know where your

805
00:41:56,000 --> 00:41:57,960
Speaker 10: state's going to be done us now, But for the

806
00:41:58,080 --> 00:42:01,799
Speaker 10: next five years, we've had five ballanced budgets in a row,

807
00:42:02,160 --> 00:42:05,800
Speaker 10: and this year we've gotten place the biggest middle class

808
00:42:05,880 --> 00:42:08,240
Speaker 10: tax cut in the history of the state. It's about

809
00:42:08,280 --> 00:42:11,840
Speaker 10: five hundred million dollars, say folks, about ten or fifteen

810
00:42:11,920 --> 00:42:15,200
Speaker 10: percent on their tax bills, and a lot of our

811
00:42:15,239 --> 00:42:18,640
Speaker 10: neighboring streets have been raising taxes where we held the line.

812
00:42:18,719 --> 00:42:21,439
Speaker 10: Now reducing them a little bit. I hope it sends

813
00:42:21,480 --> 00:42:23,200
Speaker 10: a signal it's a good place to live, a good

814
00:42:23,239 --> 00:42:24,320
Speaker 10: place to grow your business.

815
00:42:24,680 --> 00:42:29,359
Speaker 4: Who qualifies for these tax cuts? Come again, jess, who

816
00:42:29,480 --> 00:42:31,160
Speaker 4: qualifies for these tax cuts.

817
00:42:32,320 --> 00:42:35,760
Speaker 10: Family's up to about three hundred thousand dollars in annual income.

818
00:42:37,239 --> 00:42:40,560
Speaker 1: So Governor also saw for the state of Connecticut, you

819
00:42:40,600 --> 00:42:43,359
Speaker 1: guys have this unique bond program. We like talking about

820
00:42:43,360 --> 00:42:45,960
Speaker 1: the bond market here on Bloomberg Radio. Municipal bonds. We're

821
00:42:46,000 --> 00:42:48,359
Speaker 1: big fans of that. Here talk to us about kind

822
00:42:48,360 --> 00:42:51,800
Speaker 1: of these baby bonds program in the state of Connecticut.

823
00:42:54,120 --> 00:42:56,680
Speaker 10: Yeah, I'm working with Treasurer Eric Russell. We got that

824
00:42:56,920 --> 00:43:01,160
Speaker 10: passed this last cycle. Got that funded. More importantly, so,

825
00:43:01,440 --> 00:43:04,960
Speaker 10: any kid born into poverty, born I'm under Medicaid, We'll

826
00:43:05,000 --> 00:43:08,080
Speaker 10: get a thirty two hundred dollars set aside for that

827
00:43:08,239 --> 00:43:10,720
Speaker 10: little baby. And at the age of eighteen or twenty

828
00:43:10,800 --> 00:43:13,600
Speaker 10: five up the age thirty, you've got to cash in

829
00:43:13,719 --> 00:43:16,400
Speaker 10: that bond and that could be used for education or

830
00:43:16,520 --> 00:43:18,840
Speaker 10: down payment in the house, help you start a business,

831
00:43:19,239 --> 00:43:22,920
Speaker 10: help you with job training expenses. It's aspirational, gives our

832
00:43:23,200 --> 00:43:25,920
Speaker 10: kids a reason to stay in Connecticut. They know, at

833
00:43:25,920 --> 00:43:28,160
Speaker 10: the age of eighteen or as soon they're after they're

834
00:43:28,160 --> 00:43:30,400
Speaker 10: going to have the opportunity to use that money.

835
00:43:31,600 --> 00:43:33,640
Speaker 4: It looks like President Biden is actually supposed to be

836
00:43:33,760 --> 00:43:37,360
Speaker 4: headed to Connecticut on Friday to talk about the state's

837
00:43:37,480 --> 00:43:39,759
Speaker 4: leadership when it comes to gun safety. What do you

838
00:43:39,880 --> 00:43:41,720
Speaker 4: expect to discuss with the President?

839
00:43:43,960 --> 00:43:45,840
Speaker 10: Oh, it's great, he'll be up here at the University

840
00:43:45,880 --> 00:43:49,120
Speaker 10: of Hartford tomorrow afternoon. I think doing two things. One

841
00:43:49,840 --> 00:43:52,600
Speaker 10: saluting the fact that Connecticut has really been a leader

842
00:43:52,640 --> 00:43:55,600
Speaker 10: when it comes to a gun safety and anti crime.

843
00:43:55,680 --> 00:43:58,520
Speaker 10: We just passed one of the most significant gun safety

844
00:43:59,800 --> 00:44:03,080
Speaker 10: law in the country in the last few weeks, getting

845
00:44:03,120 --> 00:44:06,520
Speaker 10: those illegal ghost guns off the street and getting those

846
00:44:06,760 --> 00:44:09,960
Speaker 10: repeat offenders off the street. And at the same time,

847
00:44:10,320 --> 00:44:12,440
Speaker 10: our Senator Chris Murphy has taken a lot of the

848
00:44:12,520 --> 00:44:15,800
Speaker 10: Connecticut ideas and brought them down to Washington, d c.

849
00:44:16,000 --> 00:44:18,440
Speaker 10: And about a year ago they passed on a bipartisan

850
00:44:18,520 --> 00:44:22,759
Speaker 10: basis some significant gun safety laws. So we can work

851
00:44:22,880 --> 00:44:25,160
Speaker 10: by ourselves as a small state. It's a lot better

852
00:44:25,160 --> 00:44:27,000
Speaker 10: if we work as a region. Even better if we

853
00:44:27,080 --> 00:44:27,759
Speaker 10: work as a nation.

854
00:44:28,760 --> 00:44:30,880
Speaker 1: Governor, you mentioned you know that you came from the

855
00:44:30,960 --> 00:44:34,799
Speaker 1: business world. Give us a sense of kind of if

856
00:44:34,840 --> 00:44:36,880
Speaker 1: I wanted to open a business or relocate a business,

857
00:44:36,920 --> 00:44:39,520
Speaker 1: talk to me about the advantages and disadvantages of coming

858
00:44:39,560 --> 00:44:40,160
Speaker 1: to Connecticut.

859
00:44:42,400 --> 00:44:45,359
Speaker 10: Yeah, I like that question. I'll tell you first off,

860
00:44:46,600 --> 00:44:48,560
Speaker 10: we like to move fast in the business world, and

861
00:44:48,680 --> 00:44:51,120
Speaker 10: I find too often government has a bad case of

862
00:44:51,160 --> 00:44:55,719
Speaker 10: the slows. So we're really trying to speed up that process.

863
00:44:56,440 --> 00:44:58,600
Speaker 10: We're one phone call away. You always can get me

864
00:44:58,960 --> 00:45:03,000
Speaker 10: or the head of you know, DECD, Economic Community Development,

865
00:45:03,160 --> 00:45:05,920
Speaker 10: white shoe treatment. Make sure we get you through see

866
00:45:05,960 --> 00:45:08,920
Speaker 10: and get that business started up. I think people should

867
00:45:08,960 --> 00:45:11,160
Speaker 10: have some confidence with this tax cut. This is a

868
00:45:11,239 --> 00:45:14,520
Speaker 10: place where we're getting our fiscal house in order. We're

869
00:45:14,560 --> 00:45:17,120
Speaker 10: not having to raise taxes, we're not looking at deficits,

870
00:45:17,680 --> 00:45:21,160
Speaker 10: and we're paying down our unfunded pension liabilities. So from

871
00:45:21,239 --> 00:45:23,719
Speaker 10: a fiscal stability point of view, I think people feel

872
00:45:23,760 --> 00:45:26,800
Speaker 10: pretty good. And we kept our schools open when a

873
00:45:26,840 --> 00:45:29,160
Speaker 10: lot of other places had them closed, so it gives

874
00:45:29,239 --> 00:45:32,680
Speaker 10: us sort of signal about where you can be. We

875
00:45:32,800 --> 00:45:36,000
Speaker 10: kept our manufacturing and construction open all during COVID, so

876
00:45:36,200 --> 00:45:38,200
Speaker 10: I think people have a sense of them it's a

877
00:45:38,239 --> 00:45:39,360
Speaker 10: good place to do business.

878
00:45:39,880 --> 00:45:42,840
Speaker 4: Since we are in a pre election year, wanted to

879
00:45:42,920 --> 00:45:47,560
Speaker 4: get your thoughts on Trump's legal issues and what that

880
00:45:47,800 --> 00:45:50,239
Speaker 4: means to you as far as when we're heading into

881
00:45:50,760 --> 00:45:51,920
Speaker 4: the election year next year.

882
00:45:54,719 --> 00:45:58,720
Speaker 10: Boy, I can't bear going through all that Trump distraction

883
00:45:59,000 --> 00:46:04,000
Speaker 10: for another six years if he got elected. I like

884
00:46:04,440 --> 00:46:07,080
Speaker 10: President Biden. I like his infrastructure bill. I like the

885
00:46:07,200 --> 00:46:10,600
Speaker 10: fact that with the money we got for infrastructure, we're

886
00:46:10,600 --> 00:46:13,720
Speaker 10: going to be able to speed up your commute by ten, fifteen,

887
00:46:13,880 --> 00:46:17,000
Speaker 10: twenty minutes over the next seven or eight years. You know,

888
00:46:17,080 --> 00:46:20,279
Speaker 10: for a state like Connecticut, where our location is so

889
00:46:20,440 --> 00:46:24,600
Speaker 10: strategic between New York City, the global capital, financial capital

890
00:46:24,640 --> 00:46:27,680
Speaker 10: of the world, and Boston with the life sciences, access

891
00:46:27,880 --> 00:46:29,800
Speaker 10: there is really important. You probably not have to be

892
00:46:29,880 --> 00:46:32,120
Speaker 10: there five days a week, but able to get in

893
00:46:32,239 --> 00:46:34,080
Speaker 10: and out is so important. That's part of what the

894
00:46:34,120 --> 00:46:35,239
Speaker 10: infrastructure bill does.

895
00:46:36,440 --> 00:46:38,960
Speaker 1: Governor, you're you know, Connecticut's a unique stake for many,

896
00:46:39,280 --> 00:46:41,600
Speaker 1: many reasons, one of which is just a geography you mentioned.

897
00:46:41,640 --> 00:46:43,640
Speaker 1: I mean, half the state's Yankee fans the other half

898
00:46:43,640 --> 00:46:47,840
Speaker 1: are Red Sox fans. So you know about managing division

899
00:46:47,920 --> 00:46:50,160
Speaker 1: and diversity in the state. I'd love to get your

900
00:46:50,239 --> 00:46:52,960
Speaker 1: view just from the macro level kind of in this country,

901
00:46:53,680 --> 00:46:56,840
Speaker 1: the level of divisiveness has just never been better, and

902
00:46:56,920 --> 00:46:59,000
Speaker 1: we even have names for it. Red state, Blue state.

903
00:46:59,080 --> 00:47:02,239
Speaker 1: However you want to frame, how do you think about that?

904
00:47:02,400 --> 00:47:04,800
Speaker 1: And is there a way forward to kind of bridge

905
00:47:04,920 --> 00:47:07,400
Speaker 1: that and kind of minimize some of the differences.

906
00:47:09,000 --> 00:47:11,720
Speaker 10: We got to get to know each other better as people,

907
00:47:12,000 --> 00:47:17,920
Speaker 10: not simply as ideological targets, and Washington is broken in

908
00:47:18,000 --> 00:47:22,040
Speaker 10: that sense. I'm really pleased that McCarthy and Biden were

909
00:47:22,080 --> 00:47:24,120
Speaker 10: able to get that debt sealing thing solved on a

910
00:47:24,200 --> 00:47:27,960
Speaker 10: reasonably bipartisan basis. I thought that was important. You know,

911
00:47:28,080 --> 00:47:32,120
Speaker 10: here in Connecticut, support for our budget was almost universal,

912
00:47:32,280 --> 00:47:34,160
Speaker 10: thirty five to one in the state Senate.

913
00:47:34,320 --> 00:47:34,759
Speaker 6: Not bad.

914
00:47:35,960 --> 00:47:38,279
Speaker 10: And you know, we're a smaller state. We know each

915
00:47:38,320 --> 00:47:41,239
Speaker 10: other and we know the compromise is not a dirty word.

916
00:47:42,200 --> 00:47:45,880
Speaker 4: Any sort of ambitions to run for president.

917
00:47:47,640 --> 00:47:50,800
Speaker 10: Look, I was just re elected here as governor, and

918
00:47:51,400 --> 00:47:53,279
Speaker 10: I'll tell you just I love the job. I mean,

919
00:47:53,320 --> 00:47:55,320
Speaker 10: if you come out of the business world being a

920
00:47:56,280 --> 00:47:58,960
Speaker 10: senator or congressman, it's just not the same thing. As

921
00:47:59,040 --> 00:48:01,360
Speaker 10: being an executive, have a chance to make a difference

922
00:48:01,440 --> 00:48:04,719
Speaker 10: in your own state, and I love exactly what I'm

923
00:48:04,719 --> 00:48:05,239
Speaker 10: doing right.

924
00:48:05,200 --> 00:48:10,480
Speaker 1: Now governor the Republican nomination, it's you know, there is

925
00:48:10,560 --> 00:48:14,200
Speaker 1: a presumed leader front runner and president, former President Trump,

926
00:48:14,239 --> 00:48:17,040
Speaker 1: but there's a lot of other folks getting into the race.

927
00:48:17,680 --> 00:48:19,239
Speaker 1: How do you view kind of what's shaping up to

928
00:48:19,239 --> 00:48:22,520
Speaker 1: be a pretty crowded Republican primary season.

929
00:48:25,000 --> 00:48:26,839
Speaker 10: I guess the more people in the race, the better

930
00:48:26,920 --> 00:48:29,480
Speaker 10: it is for Donald Trump. So I'd like to think

931
00:48:29,560 --> 00:48:33,480
Speaker 10: that the Republicans will sort this out pretty soon, you know,

932
00:48:33,640 --> 00:48:36,879
Speaker 10: after Super Tuesday, and make it a one on one

933
00:48:37,040 --> 00:48:40,120
Speaker 10: race and give the Republican primary voters a real and

934
00:48:40,200 --> 00:48:43,080
Speaker 10: clear choice. There's a guy I know, I know the

935
00:48:43,120 --> 00:48:45,600
Speaker 10: governor is pretty well. His name is Doug Bergham. He's

936
00:48:45,640 --> 00:48:49,040
Speaker 10: the governor of North Dakota. I think he's the most

937
00:48:49,120 --> 00:48:51,960
Speaker 10: substantive on that side of the I R running for president,

938
00:48:52,680 --> 00:48:54,080
Speaker 10: solid guy and governor.

939
00:48:54,520 --> 00:48:56,880
Speaker 1: What would you suggest that, you know, in terms of

940
00:48:56,960 --> 00:48:58,640
Speaker 1: kind of bridging that divide, What are some of the

941
00:48:58,680 --> 00:49:01,320
Speaker 1: ways that you would suggest to kind of, you know,

942
00:49:02,000 --> 00:49:05,120
Speaker 1: go into a red state or blue state and kind

943
00:49:05,160 --> 00:49:08,480
Speaker 1: of bridge a broader discussion with people. What what do

944
00:49:08,560 --> 00:49:10,040
Speaker 1: you find could be effective?

945
00:49:11,640 --> 00:49:14,200
Speaker 10: I think go to places where you don't think that

946
00:49:14,360 --> 00:49:18,040
Speaker 10: people necessarily are like you, not necessarily red or blue.

947
00:49:18,719 --> 00:49:21,239
Speaker 10: Make sure you go where you can have a really

948
00:49:21,400 --> 00:49:23,840
Speaker 10: frank discussion. Go to places where you can sort of

949
00:49:23,880 --> 00:49:26,800
Speaker 10: break the stereotype they may have of a Republican or

950
00:49:26,840 --> 00:49:31,479
Speaker 10: a Democrat. You know, people are willing to listen, people

951
00:49:31,520 --> 00:49:33,320
Speaker 10: are willing to give you a shot, but sometimes have

952
00:49:33,440 --> 00:49:35,560
Speaker 10: to go to their place to make your case.

953
00:49:36,120 --> 00:49:38,680
Speaker 4: And I know that you just recently signed a voting

954
00:49:38,840 --> 00:49:41,040
Speaker 4: rights Act into law. Tells more about that.

955
00:49:42,920 --> 00:49:46,320
Speaker 10: That was a big deal. I mean, Connecticut is a

956
00:49:46,440 --> 00:49:49,800
Speaker 10: leader on so many issues, not un early voting. We

957
00:49:49,880 --> 00:49:52,880
Speaker 10: were one of the slow polks there, and now we

958
00:49:53,040 --> 00:49:56,279
Speaker 10: pass the law that says you can vote up to

959
00:49:56,320 --> 00:50:00,319
Speaker 10: two weeks before that general election and also advance voting

960
00:50:00,360 --> 00:50:02,959
Speaker 10: for primaries as well. Look, in this day and age,

961
00:50:02,960 --> 00:50:05,640
Speaker 10: you don't have total control over your schedule. Maybe you're commuting,

962
00:50:05,719 --> 00:50:08,440
Speaker 10: maybe you're out of state part of the day. It

963
00:50:08,600 --> 00:50:11,640
Speaker 10: just makes sense. You know, during COVID, we allowed no

964
00:50:11,760 --> 00:50:16,120
Speaker 10: excuses absentine balloting, and you know a vast majority of

965
00:50:16,200 --> 00:50:19,359
Speaker 10: our people took advantage of it. I wanted to make

966
00:50:19,400 --> 00:50:22,160
Speaker 10: it easier for people to vote and vote with integrity.

967
00:50:22,920 --> 00:50:24,399
Speaker 1: Hey, Governor, I want to just thank you so much

968
00:50:24,400 --> 00:50:27,360
Speaker 1: for giving us a few minutes of your time, Ned Lamont, Governor,

969
00:50:27,600 --> 00:50:30,839
Speaker 1: the State of Connecticut giving us the state of the state,

970
00:50:30,920 --> 00:50:33,440
Speaker 1: as they say, so I think what the government. One

971
00:50:33,440 --> 00:50:34,960
Speaker 1: of the messages I think the Governor's been trying to

972
00:50:35,000 --> 00:50:37,080
Speaker 1: get through over the last period of time is that

973
00:50:37,200 --> 00:50:40,640
Speaker 1: the state of Connecticut is open for business. And again,

974
00:50:40,680 --> 00:50:43,400
Speaker 1: they just passed their budget with substantial tax cuts. And

975
00:50:43,480 --> 00:50:45,279
Speaker 1: I know a lot of folks in the metro area

976
00:50:45,360 --> 00:50:48,279
Speaker 1: here have left the metro area, whether it's Connecticut or

977
00:50:48,400 --> 00:50:51,600
Speaker 1: New York or New Jersey because of the high right

978
00:50:51,840 --> 00:50:54,360
Speaker 1: tax regime and going to lower tax regimes and.

979
00:50:54,400 --> 00:50:56,640
Speaker 4: So middle income tax cuts.

980
00:50:56,800 --> 00:51:00,600
Speaker 1: Yeah, so it's important here. So let's see how that

981
00:51:00,680 --> 00:51:04,600
Speaker 1: plays out for our good friends up in Connecticut. I'm

982
00:51:04,600 --> 00:51:06,520
Speaker 1: a big fan of Connecticut good stuff. Sometimes I get

983
00:51:06,560 --> 00:51:08,879
Speaker 1: caught on the Connecticut term bike like all the time

984
00:51:08,960 --> 00:51:11,879
Speaker 1: on nine to ninety five, But otherwise all good stuff there.

985
00:51:12,120 --> 00:51:13,279
Speaker 6: You're listening to the tape.

986
00:51:13,520 --> 00:51:16,799
Speaker 8: Can's are Live program Bloomberg Markets weekdays at ten am

987
00:51:16,880 --> 00:51:20,600
Speaker 8: Eastern on Bloomberg Radio the tune in app, Bloomberg.

988
00:51:20,160 --> 00:51:22,120
Speaker 6: Dot Com and the Bloomberg Business app.

989
00:51:22,200 --> 00:51:25,000
Speaker 8: You can also listen live on Amazon Alexa from our

990
00:51:25,040 --> 00:51:29,400
Speaker 8: flagship New York station. Just say Alexa playing Bloomberg eleven thirty.

991
00:51:31,040 --> 00:51:32,279
Speaker 1: All right, I'm We'll get on a stock on the

992
00:51:32,320 --> 00:51:35,560
Speaker 1: downside here today. Kroger, the supermarket chain of four percent.

993
00:51:35,760 --> 00:51:39,319
Speaker 1: They reported some numbers. The profit topped expectations as far

994
00:51:39,360 --> 00:51:40,680
Speaker 1: as I can tell, but I know the sales come

995
00:51:40,760 --> 00:51:42,719
Speaker 1: up a little bit shy. So that's causing people to say,

996
00:51:42,760 --> 00:51:45,680
Speaker 1: uh oh, maybe the consumer's pulling back a little bit.

997
00:51:45,960 --> 00:51:48,080
Speaker 1: But let's bring on someone who does this stuff for

998
00:51:48,080 --> 00:51:50,960
Speaker 1: a living. Those the real expert here on the supermarket

999
00:51:51,000 --> 00:51:54,680
Speaker 1: business and retail in general. That's Jen Bartasha's senior industry

1000
00:51:54,680 --> 00:51:58,520
Speaker 1: analysts for Bloomberg Intelligence. So Jen, people not buying as

1001
00:51:58,640 --> 00:51:59,160
Speaker 1: much food?

1002
00:51:59,280 --> 00:51:59,800
Speaker 6: What's going on?

1003
00:52:01,120 --> 00:52:04,040
Speaker 7: Hi, Paul, So what's really happening. Kroger, by all accounts,

1004
00:52:04,080 --> 00:52:06,719
Speaker 7: had a pretty decent quarter, and there are a lot

1005
00:52:06,760 --> 00:52:09,800
Speaker 7: of things to be optimistic about, but it's really the

1006
00:52:10,000 --> 00:52:13,640
Speaker 7: backdrop of the weaker consumer that's pulling down the stock,

1007
00:52:13,680 --> 00:52:16,359
Speaker 7: and it's really kind of weighing on expectations of how

1008
00:52:16,480 --> 00:52:19,120
Speaker 7: much growth really can they can achieve over the course

1009
00:52:19,160 --> 00:52:19,880
Speaker 7: of the rest of the year.

1010
00:52:20,120 --> 00:52:23,680
Speaker 4: Were you able to extrapolate from the report what items

1011
00:52:23,760 --> 00:52:26,279
Speaker 4: consumers were pulling back on in which ones they were

1012
00:52:26,280 --> 00:52:26,800
Speaker 4: still buying.

1013
00:52:27,680 --> 00:52:30,120
Speaker 7: Well, I think one of the interesting takeaways from Kroger's

1014
00:52:30,160 --> 00:52:34,239
Speaker 7: conversation today is that companies that have the capability to

1015
00:52:34,719 --> 00:52:39,320
Speaker 7: segregate their consumer base into different segments is becoming increasingly important.

1016
00:52:39,680 --> 00:52:42,640
Speaker 7: We've all talked about the bifurcation of the consumer, how

1017
00:52:42,800 --> 00:52:46,120
Speaker 7: low income consumers are under a lot of pressure and

1018
00:52:46,200 --> 00:52:48,840
Speaker 7: those that are in hir income households are behaving like

1019
00:52:49,000 --> 00:52:52,400
Speaker 7: normal and that's playing through with Kroger as well. And

1020
00:52:52,520 --> 00:52:55,040
Speaker 7: so the consumers that are pulling back are the ones

1021
00:52:55,040 --> 00:52:58,760
Speaker 7: who are suffering from you know, dwindling snap payments, increase,

1022
00:52:58,800 --> 00:53:02,840
Speaker 7: pressure from inflation, higher cost of living, and that segment

1023
00:53:02,960 --> 00:53:06,760
Speaker 7: is really what's under a lot of stress and continues

1024
00:53:06,760 --> 00:53:07,760
Speaker 7: to be undertood I'll.

1025
00:53:07,560 --> 00:53:08,640
Speaker 6: Say what I do, Jess.

1026
00:53:08,640 --> 00:53:09,719
Speaker 1: I don't know if you do it, but this is

1027
00:53:09,840 --> 00:53:12,040
Speaker 1: for the first time in my life as a shopper.

1028
00:53:12,480 --> 00:53:15,040
Speaker 1: I don't even consider trading down, but I am trading

1029
00:53:15,120 --> 00:53:18,520
Speaker 1: down to the store brands. Yes, I'll do a lot

1030
00:53:18,560 --> 00:53:19,320
Speaker 1: of this stuff.

1031
00:53:19,160 --> 00:53:22,920
Speaker 4: And because being exactly the same, it's materially.

1032
00:53:22,640 --> 00:53:25,920
Speaker 1: Cheaper than the brands. So Jen, I mean, boy, if

1033
00:53:25,920 --> 00:53:28,200
Speaker 1: it's happening to me, like I'd never even thought about

1034
00:53:28,200 --> 00:53:29,920
Speaker 1: that stuff before, and.

1035
00:53:30,200 --> 00:53:32,319
Speaker 7: That is a trend. Private label so far this year

1036
00:53:32,400 --> 00:53:35,960
Speaker 7: has just been on fire across the board for many,

1037
00:53:36,000 --> 00:53:39,520
Speaker 7: many retailers, and it's precisely because there's been a lot

1038
00:53:39,560 --> 00:53:41,800
Speaker 7: of investment in the last few years in improving the

1039
00:53:41,880 --> 00:53:44,840
Speaker 7: quality and the selection of those private label products, and

1040
00:53:44,960 --> 00:53:48,400
Speaker 7: when customers trade into them for need, they're discovering that

1041
00:53:48,480 --> 00:53:52,640
Speaker 7: they really are very good substitutes for national brands. And

1042
00:53:52,800 --> 00:53:56,719
Speaker 7: so that momentum and private label is really expected to

1043
00:53:56,800 --> 00:53:58,680
Speaker 7: continue through the end of the next year and into

1044
00:53:58,719 --> 00:54:02,000
Speaker 7: twenty twenty four. But it's also good for retailers because

1045
00:54:02,080 --> 00:54:05,560
Speaker 7: those items have much higher margin for the retailers than

1046
00:54:05,560 --> 00:54:06,520
Speaker 7: the national brands do.

1047
00:54:07,280 --> 00:54:10,040
Speaker 4: Something I'm curious about, too, is when we've continued to

1048
00:54:10,080 --> 00:54:13,680
Speaker 4: see a number of these companies pass on those price

1049
00:54:14,920 --> 00:54:17,480
Speaker 4: increases for the past few quarters, and we're able to

1050
00:54:17,600 --> 00:54:20,600
Speaker 4: successfully do that, but Campbell's Soup actually signaled recently that

1051
00:54:20,800 --> 00:54:22,960
Speaker 4: shoppers are becoming less willing to put up with those

1052
00:54:23,080 --> 00:54:25,759
Speaker 4: price increases, Whereas and then you hear from General Mills.

1053
00:54:25,760 --> 00:54:28,240
Speaker 4: They had an investor day last week where they started

1054
00:54:28,280 --> 00:54:30,400
Speaker 4: talking about how the raising the cost of its products

1055
00:54:30,400 --> 00:54:34,240
Speaker 4: would likely become more difficult even as inflation is cooling.

1056
00:54:34,440 --> 00:54:36,719
Speaker 4: Are you getting a sense that we're going to hear

1057
00:54:36,920 --> 00:54:39,960
Speaker 4: more of those themes potentially coming up once we get

1058
00:54:40,160 --> 00:54:41,919
Speaker 4: earning season. It's going to be a little bit a while,

1059
00:54:41,920 --> 00:54:43,480
Speaker 4: as you know, because a lot of those retailers were

1060
00:54:43,520 --> 00:54:45,480
Speaker 4: at the tail end of that. But could there be

1061
00:54:45,600 --> 00:54:48,640
Speaker 4: early indications when you hear from like a Campbell's, General Mills.

1062
00:54:49,560 --> 00:54:52,160
Speaker 7: Yeah, it's a great question. We've been actually warning on

1063
00:54:52,280 --> 00:54:55,160
Speaker 7: this coming for quite a while at Bloomberg Intelligence, and

1064
00:54:55,280 --> 00:54:58,719
Speaker 7: really what we're saying is that even as inflation comes down,

1065
00:54:58,800 --> 00:55:02,960
Speaker 7: the consumer has hopped out and means that they've adjusted

1066
00:55:02,960 --> 00:55:06,960
Speaker 7: their shopping patterns, they're spending where they're spending, and the

1067
00:55:07,120 --> 00:55:10,200
Speaker 7: volume of goods is going to become much more important

1068
00:55:10,239 --> 00:55:14,080
Speaker 7: again because all these companies have enjoyed top top line

1069
00:55:14,120 --> 00:55:17,239
Speaker 7: growth spurred by inflation, so the kind of an artificial

1070
00:55:17,400 --> 00:55:21,000
Speaker 7: increase in price is driven growth. Now as inflation comes

1071
00:55:21,080 --> 00:55:23,640
Speaker 7: down and prices are starting to come down, it's going

1072
00:55:23,719 --> 00:55:26,080
Speaker 7: to become much more important that they drive volume again

1073
00:55:26,239 --> 00:55:29,040
Speaker 7: and increase the volume of goods sold. What we think

1074
00:55:29,200 --> 00:55:31,200
Speaker 7: is that as inflation comes down, there's going to be

1075
00:55:31,280 --> 00:55:33,160
Speaker 7: a lag. So we could be in for a couple

1076
00:55:33,239 --> 00:55:35,920
Speaker 7: of tough quarters for both the CpG companies and some

1077
00:55:36,040 --> 00:55:39,239
Speaker 7: of the retailers until volume starts to catch up to

1078
00:55:39,320 --> 00:55:40,560
Speaker 7: where inflation comes down.

1079
00:55:41,400 --> 00:55:43,480
Speaker 1: Jen, just give us an overview of kind of the

1080
00:55:43,600 --> 00:55:46,480
Speaker 1: industry structure these days. I know there's I think there's

1081
00:55:46,520 --> 00:55:48,239
Speaker 1: some M and A. I mean, give us a sense

1082
00:55:48,280 --> 00:55:50,200
Speaker 1: of who the big players are. Will there be more

1083
00:55:50,360 --> 00:55:52,920
Speaker 1: M and A? Is everybody just trying to compete against Walmart?

1084
00:55:52,960 --> 00:55:53,320
Speaker 6: Where are we?

1085
00:55:54,239 --> 00:55:56,520
Speaker 7: Well? Walmart is by far the biggest food retailer in

1086
00:55:56,560 --> 00:56:00,920
Speaker 7: the United States coming and over fifty percent of Walmart's

1087
00:56:00,960 --> 00:56:04,880
Speaker 7: revenue comes from food and grocery here. It is a

1088
00:56:05,040 --> 00:56:06,000
Speaker 7: tremendous business.

1089
00:56:06,040 --> 00:56:09,120
Speaker 4: But also Target recently got moved to Staples because of

1090
00:56:09,239 --> 00:56:12,200
Speaker 4: their percentage of groceries as well. It actually happened to

1091
00:56:12,400 --> 00:56:14,719
Speaker 4: more Target got moved over to the Staples of the

1092
00:56:14,800 --> 00:56:16,560
Speaker 4: S and P five Punt than a Dollar Tree, Dollar

1093
00:56:16,680 --> 00:56:18,160
Speaker 4: General exactly.

1094
00:56:18,320 --> 00:56:20,400
Speaker 7: So all of these and all of these companies are

1095
00:56:20,440 --> 00:56:23,520
Speaker 7: selling more and more food to consumers. What that means

1096
00:56:23,600 --> 00:56:26,960
Speaker 7: is that it is a very consolidated industry. So in

1097
00:56:27,080 --> 00:56:29,680
Speaker 7: terms of M and A, everyone is really waiting and

1098
00:56:29,800 --> 00:56:33,080
Speaker 7: watching on the fate of the Albertson's and Kroger merger

1099
00:56:34,080 --> 00:56:36,960
Speaker 7: and whether that will successfully go through and if so,

1100
00:56:37,480 --> 00:56:39,800
Speaker 7: how many stores are going to be required to be divested.

1101
00:56:40,560 --> 00:56:42,680
Speaker 7: I don't see a lot of other M and A

1102
00:56:42,800 --> 00:56:45,239
Speaker 7: coming until we get a real sense for where, you know,

1103
00:56:45,280 --> 00:56:48,640
Speaker 7: where the acceptance level is based on that merger. But

1104
00:56:48,960 --> 00:56:52,440
Speaker 7: it is already a fairly consolidated market. What that means

1105
00:56:52,600 --> 00:56:54,840
Speaker 7: is that there is scale for these companies, and so

1106
00:56:55,280 --> 00:56:57,400
Speaker 7: you know, the good news for consumers is that that

1107
00:56:57,640 --> 00:57:01,200
Speaker 7: scale will translate into prices coming down perhaps faster than

1108
00:57:01,239 --> 00:57:04,640
Speaker 7: they have historically, just by virtue of how big these

1109
00:57:04,680 --> 00:57:06,279
Speaker 7: companies are now can.

1110
00:57:06,200 --> 00:57:08,320
Speaker 1: They get people to work in these stores house the

1111
00:57:08,400 --> 00:57:11,120
Speaker 1: labor situation for a lot of the big companies you follow.

1112
00:57:12,160 --> 00:57:14,920
Speaker 7: Labor has been a challenge, but I would say that

1113
00:57:15,160 --> 00:57:19,120
Speaker 7: across the board, retention rates are fairly stable. They haven't

1114
00:57:19,120 --> 00:57:23,080
Speaker 7: gotten worse. These companies have invested a lot ever since

1115
00:57:23,520 --> 00:57:27,120
Speaker 7: since about twenty sixteen. They've invested a lot in wages,

1116
00:57:27,520 --> 00:57:34,040
Speaker 7: They've invested in training and on a comparative basis. You know, people,

1117
00:57:34,400 --> 00:57:37,840
Speaker 7: if they can make a decent wage working in a store,

1118
00:57:38,600 --> 00:57:42,000
Speaker 7: that's pulling some talent away from other big hiring sectors

1119
00:57:42,120 --> 00:57:46,480
Speaker 7: like restaurants as an example. And so at this point,

1120
00:57:46,560 --> 00:57:49,480
Speaker 7: the labor situation I would say is fairly stable, but

1121
00:57:49,640 --> 00:57:52,200
Speaker 7: it's still expensive and they're going to have to continue

1122
00:57:52,200 --> 00:57:54,760
Speaker 7: to invest in wages to retain people as they go forward.

1123
00:57:55,360 --> 00:57:57,640
Speaker 1: Well, you were absolutely spot on this one, Jenna, and

1124
00:57:57,760 --> 00:57:59,560
Speaker 1: I never doubt you. But I mean, I just pulled

1125
00:57:59,600 --> 00:58:03,280
Speaker 1: up the p GEO function for Walmart. Man Groceries is

1126
00:58:03,640 --> 00:58:06,600
Speaker 1: just the biggest business. It is amazing how big and

1127
00:58:06,640 --> 00:58:08,280
Speaker 1: you just don't even think about it, or I don't,

1128
00:58:08,320 --> 00:58:11,720
Speaker 1: but the largest grocer in the US and the industry

1129
00:58:11,960 --> 00:58:15,160
Speaker 1: pretty cool stuff. Jen Bartash is senior industry analyst for

1130
00:58:15,200 --> 00:58:19,640
Speaker 1: Bloomberg Intelligence. He's based at our lovely Princeton campus down

1131
00:58:19,680 --> 00:58:21,720
Speaker 1: there in Princeton, So we appreciate getting a few minutes

1132
00:58:21,720 --> 00:58:22,440
Speaker 1: of Jen's time here.

1133
00:58:22,960 --> 00:58:26,040
Speaker 2: Thanks for listening to the Bloomberg Markets podcasts. You can

1134
00:58:26,120 --> 00:58:29,840
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever

1135
00:58:29,960 --> 00:58:31,440
Speaker 2: podcast platform you prefer.

1136
00:58:31,840 --> 00:58:32,600
Speaker 9: I'm Matt Miller.

1137
00:58:32,920 --> 00:58:36,320
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three and

1138
00:58:36,440 --> 00:58:37,120
Speaker 2: I'm Faul Sweeney.

1139
00:58:37,160 --> 00:58:39,760
Speaker 1: I'm on Twitter at pt Sweeney Before the podcast. You

1140
00:58:39,840 --> 00:58:42,160
Speaker 1: can always catch us worldwide at Bloomberg Radio