WEBVTT - Markets, Retail, And Washington (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:22.600 at Bloomberg dot com Slash podcast. Looking at these markets 0:00:22.600 --> 0:00:24.760 as Nathan's just reporting, you know, hitting new Intra day 0:00:24.800 --> 0:00:29.120 lows down one point six, the dallaf warnered fifty points. 0:00:29.200 --> 0:00:31.920 Let's bring in a professional and get a professional opinion 0:00:31.960 --> 0:00:34.240 on what these markets are telling us. Here Mace McClean 0:00:34.680 --> 0:00:38.440 see I O president and Managing director at Frost Investment 0:00:38.520 --> 0:00:44.919 Adviers Advisors. Uh proud graduate from the Ohio State University. Mace, 0:00:45.000 --> 0:00:46.479 thanks so much for joining us. I don't know why 0:00:46.479 --> 0:00:49.240 you guys always say the but I'll go with it. Um, 0:00:49.800 --> 0:00:51.560 what do you make of these markets over the last 0:00:51.600 --> 0:00:54.639 few days? Is this a little bear market rally kind 0:00:54.640 --> 0:00:58.760 of had its say, I would say, Jerome powege getting 0:00:59.360 --> 0:01:03.120 is best is shwis is that you know the financial 0:01:03.200 --> 0:01:07.240 conditions tightening with the sell off in the market. All right, 0:01:07.280 --> 0:01:09.400 So how pronounced I mean, I guess the question is 0:01:09.440 --> 0:01:11.760 they're gonna be out in Jackson Hole, and yes, Tom 0:01:11.800 --> 0:01:13.960 Keenan and surveillance team will be out in Jackson Hole 0:01:14.160 --> 0:01:17.320 as well. The surveillance golf stream is gassing up as 0:01:17.360 --> 0:01:20.720 we speak. Um, do you expect to get anything out 0:01:20.760 --> 0:01:22.959 of Jackson Hole this week or should we just wait 0:01:23.000 --> 0:01:27.440 for September? Well, I think this is you know, um 0:01:27.760 --> 0:01:31.680 terman Pal's chance to try to talk down the expectations 0:01:31.720 --> 0:01:35.880 of a pivot. As I said, the expectations that they 0:01:35.880 --> 0:01:38.920 would pivot and the rally in the market is really 0:01:38.920 --> 0:01:42.520 working against him, trying to tighten to nancural conditions. And 0:01:43.040 --> 0:01:44.960 so I think we're going to get a steady drum 0:01:45.000 --> 0:01:48.240 beat from uh the FED speakers that we will be 0:01:48.680 --> 0:01:51.560 um not seeing a pivot at anytime soon, but instead 0:01:51.600 --> 0:01:56.480 will be continuing to course towards rate increases. It doesn't 0:01:56.520 --> 0:01:59.840 matter who's been driving the rally. Are we worried about 0:02:00.080 --> 0:02:04.120 the retail menia coming back some sort repeat or are 0:02:04.160 --> 0:02:06.400 we okay with the fact that perhaps this rally has 0:02:06.440 --> 0:02:10.280 been on low volume. What's your take? Of course, it 0:02:10.320 --> 0:02:13.160 has been low volume in the summer trading, but we 0:02:13.200 --> 0:02:16.799 are continue to see that rotation reflet, which also reflects 0:02:16.800 --> 0:02:20.520 the rotation and consumer habits which we're you know, switching 0:02:20.680 --> 0:02:23.960 to services and out of products as we come out 0:02:24.040 --> 0:02:27.440 of the pandemic. So we're continuing to see that rotation. 0:02:28.040 --> 0:02:30.720 Um and uh, you know we have not seen I 0:02:30.720 --> 0:02:34.560 don't think solid leadership yet for the rally and the 0:02:34.639 --> 0:02:38.120 next leg up May Sorry are you You're based in 0:02:38.160 --> 0:02:44.080 San Antonio? Right? I am abundant Dallas today where it's flooding. Great. Well, 0:02:44.120 --> 0:02:47.120 I just assume anybody who this is my assumption to 0:02:47.120 --> 0:02:50.000 anybody who's from the state of Texas, they have a 0:02:50.120 --> 0:02:53.920 call on energy. So in oil, I'm looking at w 0:02:54.000 --> 0:02:56.800 T A crude oil here, we're down three, We're well 0:02:56.840 --> 0:03:01.919 below ninety barrel. Has oil has energy? Has that play 0:03:01.960 --> 0:03:06.480 played out? We don't think so. If we think that 0:03:06.560 --> 0:03:11.680 we're continuing to explore and invest in new energy fines 0:03:12.080 --> 0:03:16.600 at a rate that's slower than the rate we need 0:03:16.639 --> 0:03:20.160 to replace energy stores we're using, there's any sort of 0:03:20.200 --> 0:03:23.160 green energy transition is going to take multiple years. We're 0:03:23.200 --> 0:03:26.840 still going to need the crude and the natural gas, 0:03:27.760 --> 0:03:30.800 and right now we're under investing in that effort. So 0:03:31.280 --> 0:03:35.480 if we think that we're going to see energy stay 0:03:35.480 --> 0:03:37.880 in short supply for a number of years, and that 0:03:38.000 --> 0:03:41.000 we think that that play is has a long way 0:03:41.000 --> 0:03:44.920 to go. So let's stick with that. That idea that 0:03:44.960 --> 0:03:46.800 Paul was really getting out because it seemed like it 0:03:46.840 --> 0:03:49.000 wasn't too long ago where everyone was saying the best 0:03:49.040 --> 0:03:51.520 way to hedge your portfolio is to do one of 0:03:51.560 --> 0:03:54.320 two things, to either buy the dollar or you buy 0:03:54.560 --> 0:03:57.400 just a basket of commodities, basically because those were the 0:03:57.440 --> 0:03:59.400 two things that we're going up. At its core, though, 0:03:59.800 --> 0:04:02.840 that is a contrarian trade. The dollar and commodity should 0:04:02.840 --> 0:04:05.960 be moving opposite to each other. You talked about the 0:04:06.000 --> 0:04:08.800 commodities trade. I'm curious about the dollar trade. Are you 0:04:08.840 --> 0:04:14.040 concerned about a stronger dollar? I am concerned that the 0:04:14.160 --> 0:04:18.040 dollar may not may peek out here as we also 0:04:18.160 --> 0:04:23.479 see other monetary authorities around the world raise rates, we 0:04:23.600 --> 0:04:26.479 think that we may see a peek in the dollar 0:04:26.560 --> 0:04:31.359 at least leggling out. So I wouldn't bet uh strong 0:04:31.560 --> 0:04:35.360 that the dollar continues unabated in its current in trend 0:04:35.360 --> 0:04:38.640 that has been on. So Mace, we we just finished 0:04:38.680 --> 0:04:40.680 up Q two earnings here. They kind of came in 0:04:40.720 --> 0:04:44.560 a little bit better than expected. Maybe the expectations were 0:04:44.560 --> 0:04:48.080 pretty low going into the earning season. Here, did the 0:04:48.120 --> 0:04:51.200 earning season change your view here? Change maybe your allocation 0:04:51.279 --> 0:04:56.480 change maybe some sectors you might be looking at. Not really, 0:04:56.520 --> 0:05:02.520 We've been um nibbling at tech chnology on the in 0:05:02.560 --> 0:05:05.240 the downturns, and so we're about trying to buy high 0:05:05.279 --> 0:05:09.320 quality stocks, the pet the market being maybe a head 0:05:09.360 --> 0:05:11.920 of the FED pivot. Therefore we're you know, we're trading 0:05:11.960 --> 0:05:15.080 off today because people readjust when they think where rates 0:05:15.080 --> 0:05:18.440 are going. But the economy is weakening, and so we 0:05:18.480 --> 0:05:20.760 think we get every day get a little bit closer 0:05:20.800 --> 0:05:24.000 to that um that point where the Fed does stop 0:05:24.080 --> 0:05:29.040 raising rates and did market will get a lot more support. So, uh, 0:05:29.800 --> 0:05:32.920 we're more interested in the dips and buying high qualities 0:05:33.240 --> 0:05:39.560 companies like the technology and growth stocks in week markets. Alright, 0:05:39.560 --> 0:05:41.880 buying the dips. That's what we like to hear particularly, 0:05:41.920 --> 0:05:44.720 is equity salesperson and equity trader, buy those dips. I'll 0:05:44.720 --> 0:05:47.720 go show you some more stock. Mace McCain ce io, 0:05:47.920 --> 0:05:55.039 President and managing director for Frost Investment Advisors. Boy, it's 0:05:55.040 --> 0:05:57.120 been a tough tough go for the folks in the 0:05:57.240 --> 0:05:59.479 fixed income. Biz, let's check in with one of those, 0:05:59.520 --> 0:06:03.960 Andre skibahead of Blue Bay US fixed income that's at RBC, 0:06:04.200 --> 0:06:06.800 the Royal Bank account of Global Asset Management. Andre, thanks 0:06:06.839 --> 0:06:09.720 so much for joining us here. Help put into perspective 0:06:10.240 --> 0:06:13.039 what it's been like to be the head of US 0:06:13.120 --> 0:06:16.120 fixed income at a big Canadian bank when it's been 0:06:16.640 --> 0:06:18.920 just a brutal, brutal start to the year. Give us 0:06:19.160 --> 0:06:23.159 kind of what you've seen in the marketplace. Well, good morning. Um, 0:06:23.160 --> 0:06:26.960 it definitely felt like being on the roller coaster ride 0:06:27.440 --> 0:06:32.040 and not a particularly enjoyable one. UH this year. Investors 0:06:32.080 --> 0:06:37.040 have not seen these kind of returns within UH fixed 0:06:37.120 --> 0:06:41.520 income for a long long time. So yes, it's been 0:06:41.600 --> 0:06:48.799 brutal indeed. Alright, so obviously concern about rising interest rates? Um, 0:06:48.960 --> 0:06:51.880 where do you think this Federal reserve is going to go? 0:06:52.000 --> 0:06:56.080 There are those that said, hey, September seventi five base 0:06:56.200 --> 0:06:59.080 points and then maybe even a pause. Um, how are 0:06:59.080 --> 0:07:03.599 you guys thinking about US federal Reserve? We think that 0:07:03.680 --> 0:07:09.000 Federal reserve will be very data dependent. Um, it's pretty 0:07:09.040 --> 0:07:14.840 clear that the market, including the Federal Reserve, struggled to 0:07:14.880 --> 0:07:18.960 get their handle around where inflation is heading from here, 0:07:19.760 --> 0:07:23.360 and that is the key question that we need answers 0:07:23.440 --> 0:07:28.880 for before we can determine how aggressive Federal Reserve needs 0:07:28.880 --> 0:07:32.080 to high grate going forward. What is clear is that 0:07:32.160 --> 0:07:37.000 we have to go into restrictive territory, I tighten even 0:07:37.040 --> 0:07:44.320 more to start helping seeing inflation coming down more aggressively 0:07:44.760 --> 0:07:49.240 from here. But how far we need to go is 0:07:49.320 --> 0:07:54.560 really data dependent in the months ahead. So are you 0:07:54.600 --> 0:07:58.240 expecting anything of note here from Jackson hawayoming as the 0:07:58.480 --> 0:08:02.360 central bankers get together later this week. Well, in a way, 0:08:03.120 --> 0:08:07.240 Jackson Hole this time could be less eventful than in 0:08:07.280 --> 0:08:11.200 the previous years because FED is being honest in saying 0:08:11.200 --> 0:08:14.960 that we just need to watch the data and not 0:08:15.080 --> 0:08:20.440 everything is in their control at this point. So absolutely 0:08:20.480 --> 0:08:24.040 we would expect them to reaffirm the commitment to fighting inflation, 0:08:24.760 --> 0:08:29.360 to keep hiking rates, to pushing into restrictive territory. But 0:08:29.480 --> 0:08:32.760 how far they need to go, uh, that will be 0:08:33.000 --> 0:08:36.640 very much framed framed in the context of incoming data. 0:08:37.520 --> 0:08:41.320 So we actually should look more to inflation print ahead 0:08:41.840 --> 0:08:45.760 rather than what we hear jackson Hole to determine direction 0:08:45.760 --> 0:08:49.840 of travel. So where are you guys at Blue Bay 0:08:50.160 --> 0:08:54.960 kind of placing your bets sharpening your pencils in the 0:08:55.040 --> 0:08:59.360 US fixed income business. So we think that when you 0:08:59.440 --> 0:09:06.280 look at government bond yields, three where tenure is trading 0:09:06.360 --> 0:09:10.160 right now, is roughly where we should be at this point. 0:09:10.360 --> 0:09:14.680 So we don't have a particularly strong view that levels 0:09:14.679 --> 0:09:20.880 should be meaningfully higher um than three for the tenure 0:09:21.840 --> 0:09:27.240 in credit. We find that after the market being too 0:09:27.320 --> 0:09:30.960 panicky earlier this summer and pricing in a deep procession 0:09:31.400 --> 0:09:34.680 too quickly, the rebound that we have seen in the 0:09:34.760 --> 0:09:40.280 recent weeks means that credit assets look okay, but they 0:09:40.320 --> 0:09:45.240 don't look crazy exciting after the rebound that we have 0:09:45.400 --> 0:09:48.960 just seen. So we're much more in this weight and 0:09:49.040 --> 0:09:54.360 see mode to determine what inflation does, what pedal reserve does, 0:09:54.760 --> 0:09:58.679 and how much of a slowdown we will experience in 0:09:58.720 --> 0:10:02.560 the US over the months ahead. So talk to us 0:10:02.559 --> 0:10:04.400 a little b about liquidity here. I mean, we're talking 0:10:04.400 --> 0:10:07.880 about financial conditions looking looser and looser, but treasury liquidity 0:10:07.920 --> 0:10:10.680 specifically has been a major issue. How worried are you 0:10:10.679 --> 0:10:15.960 about that? It's true that liquidity has been pretty thin 0:10:16.679 --> 0:10:21.920 uh in multiple episodes of of this market movement, and 0:10:22.080 --> 0:10:25.880 that applies both in the treasury space, but also broadly 0:10:26.160 --> 0:10:30.520 in credit. UM, we think right now, given that we're 0:10:30.520 --> 0:10:34.240 in the second half of August, liquidity is never that great. 0:10:35.120 --> 0:10:40.679 But we look forward to market environment after Labor Day 0:10:40.800 --> 0:10:46.439 two assess the genuine level of underlying liquidity. So I 0:10:46.559 --> 0:10:52.840 thinks definitely are fluctuating from liquidity perspective, but neither are 0:10:52.960 --> 0:10:58.559 they horrible on a consistent basis. So sometimes we fear 0:10:58.559 --> 0:11:02.400 about liquidity too much, UM, But we will see how 0:11:02.440 --> 0:11:06.400 this evolves after labor Day. All right, Andre, good stuff. 0:11:06.440 --> 0:11:09.200 We appreciate you taking the time to talk fix and 0:11:09.240 --> 0:11:13.800 come with us. One of the stock stories that got 0:11:13.840 --> 0:11:16.839 my attention today was Adidas for Audi Das as the 0:11:16.880 --> 0:11:21.040 Europeans say, it announced the surprise departure of its chief 0:11:21.040 --> 0:11:23.000 executive officer. And this can't be a good time when 0:11:23.000 --> 0:11:25.000 they're dealing with what's going on in China, which is 0:11:25.040 --> 0:11:28.080 a huge supplier and end the market for them. But 0:11:28.200 --> 0:11:29.760 I want to get the latest on what's going on 0:11:30.360 --> 0:11:32.480 with Adidas and just the retail space. So who do 0:11:32.520 --> 0:11:35.000 we turn to? Put him? Goyle, senior analysts for e 0:11:35.040 --> 0:11:38.800 commerce at leisure and off price retail. Uh, that's a 0:11:38.800 --> 0:11:42.360 mouthful for Bloomberg Intelligence. She's been coming retail for ever. 0:11:42.920 --> 0:11:46.320 She was actually one of the very first hires at 0:11:46.360 --> 0:11:48.920 Bloomberg Intelligence back in two thousand nine, so she's been 0:11:48.960 --> 0:11:54.160 a rock here for Bloomberg's intelligence research operation. So putam, 0:11:54.200 --> 0:11:56.840 what do you say about Adida is here? Uh, Cosper 0:11:56.920 --> 0:11:59.320 Worsted stepping down? What's that mean? And what do you 0:11:59.320 --> 0:12:02.720 what do you take away from Yeah? Thankful? Um. I 0:12:02.760 --> 0:12:05.200 think you know it was actually by surprise. If contract 0:12:05.200 --> 0:12:10.080 doesn't end until so going out next year is we 0:12:10.240 --> 0:12:12.720 think likely a result of the weaker results that they've 0:12:12.720 --> 0:12:16.800 seen recently, some notably the execution in China. They had 0:12:16.840 --> 0:12:21.800 replaced their Chinese had earlier this year. And I think 0:12:21.840 --> 0:12:24.319 this just you know, follows onto that there results in 0:12:24.400 --> 0:12:28.960 the first quarter were very weak and guided that was 0:12:29.160 --> 0:12:33.040 largely China. We lost you there for a second. But 0:12:33.160 --> 0:12:34.959 let's go back to the China story, because I think 0:12:34.960 --> 0:12:37.680 that's so important. We're talking about a slowdown in the 0:12:37.800 --> 0:12:42.360 Chinese economy. We're also talking about potentially UM getting a 0:12:42.440 --> 0:12:45.320 lot more support in China. How does it translate to 0:12:45.360 --> 0:12:47.120 some of the issues that we're seeing when it comes 0:12:47.120 --> 0:12:52.560 to American exposure to China specifically. Yeah, I think I 0:12:52.559 --> 0:12:57.280 think for Adida specifically UM China. The issues are largely there, 0:12:57.400 --> 0:12:59.960 not even on the supplying anymore. And when you think 0:13:00.080 --> 0:13:04.000 about any company today that's investing in growth in China, 0:13:04.080 --> 0:13:06.880 whether it's Adidas or whether it's a Lemon or Nike, 0:13:07.160 --> 0:13:09.360 the struggles are all the same, so it's not relevant 0:13:09.360 --> 0:13:13.720 to just one company at home. Adidas has done very well. Actually, 0:13:14.160 --> 0:13:17.280 um They've seen the business grown nicely. They've stayed in 0:13:17.320 --> 0:13:20.079 the number two spot with Nike being the lead, and 0:13:20.160 --> 0:13:22.640 at that position, we think they were on pace to 0:13:22.679 --> 0:13:28.360 maintain per years. Where do we stand with inventories here? 0:13:28.760 --> 0:13:30.760 It sounds like you're at the Jersey shore. I would 0:13:30.760 --> 0:13:32.840 guess on the beach, but I want to see where 0:13:32.840 --> 0:13:34.360 do we standing with the inventories here? A lot of 0:13:34.360 --> 0:13:36.920 retailer's been talking about, you know, maybe they overbought and 0:13:36.960 --> 0:13:38.880 had a ton of inventory in the in the system 0:13:38.960 --> 0:13:42.040 and ano they're having to mark down prices to move inventory. 0:13:42.080 --> 0:13:44.040 Are we seeing that in the athletes are space with 0:13:44.080 --> 0:13:46.840 the Audi, Das and the Nikes of the world. Yeah, 0:13:46.840 --> 0:13:50.640 there's definitely more inventory in the retail marketplace across the board. 0:13:50.880 --> 0:13:53.680 It's true also in Adidas and at Nike, but the 0:13:53.720 --> 0:13:56.920 inventory situation is a little different. Where in North America 0:13:56.960 --> 0:14:00.199 they have the demand to support the elevated inventory his 0:14:00.280 --> 0:14:03.000 local inventory. In China they're having to mark down more, 0:14:03.080 --> 0:14:05.199 and somewhat in Europe as well. So I think it's 0:14:05.200 --> 0:14:07.400 a tale of two halfs really when you think about it, 0:14:07.640 --> 0:14:10.040 where there are pockets of areas in the business that 0:14:10.080 --> 0:14:13.360 are doing exceptionally well, but then there's a big part 0:14:13.440 --> 0:14:15.800 of the business, the growth part of the business, that's 0:14:15.840 --> 0:14:18.600 struggling and if we don't see signs of a recovery 0:14:18.679 --> 0:14:22.200 anytime soon. Put one of the big stories in the 0:14:22.200 --> 0:14:24.920 retail spaces, of course, been this build up of inventories. 0:14:24.920 --> 0:14:27.480 But what to me is so interesting is how quickly 0:14:27.520 --> 0:14:31.680 the market narrative on that inventory story has changed. Because 0:14:31.680 --> 0:14:33.040 I want to say, about a year ago or so, 0:14:33.080 --> 0:14:35.440 when we're talking about supply chain issues, a lot of 0:14:35.480 --> 0:14:39.000 these major retailers were shoring up their supply chains and 0:14:39.080 --> 0:14:42.040 having an inventory build up was a good thing. Now 0:14:42.160 --> 0:14:44.960 it seems to be such a massive negative. Do we 0:14:45.000 --> 0:14:48.640 ever see a market dynamic where we go back to 0:14:48.800 --> 0:14:51.160 the fact that an inventory build up is a good thing, 0:14:51.200 --> 0:14:55.400 given that the supply chain issues happen completely healed? Uh, 0:14:55.440 --> 0:14:57.840 you know, a lot of inventory is never a good 0:14:57.880 --> 0:15:00.360 thing in retail. You want to have the right supply 0:15:00.480 --> 0:15:03.440 with the right demand. What happened over the pandemic was 0:15:03.640 --> 0:15:06.280 I would say one time in nature. It was really 0:15:06.320 --> 0:15:08.840 a result of the pandemic. Or factories were shut down, 0:15:08.920 --> 0:15:13.000 there were transportation delayed, the report blockages. That's all now 0:15:13.120 --> 0:15:15.960 mitigated to a large extent. And do we ever go 0:15:16.040 --> 0:15:19.200 back to that situation. Hopefully not, But I think we're 0:15:19.280 --> 0:15:22.239 just going back into the normal retail cycle where retailers 0:15:22.360 --> 0:15:24.760 ordered too much and they mismatched demand and you have 0:15:24.800 --> 0:15:27.920 to mark things down. That's how retails operated for hundreds 0:15:27.920 --> 0:15:30.280 of years, and we're just back in that place again. 0:15:30.880 --> 0:15:34.480 Put them I've read something recently that says people are 0:15:34.520 --> 0:15:37.560 actually going back to the stores and the growth you're 0:15:37.560 --> 0:15:40.480 seeing and the bricks and order is pretty darn near 0:15:40.480 --> 0:15:42.480 where you're seeing on the e commerce side. Is this 0:15:42.600 --> 0:15:45.680 just a what are you seeing out there in terms 0:15:45.720 --> 0:15:48.320 of that kind of data? Well, you have to be 0:15:48.360 --> 0:15:50.240 careful when you look at the growth, right, Paul, because 0:15:50.240 --> 0:15:53.320 you're looking at two different growth comparisons. One for the 0:15:53.360 --> 0:15:55.960 online side, the growth looks more muted because you're off 0:15:55.960 --> 0:15:59.120 of very tough comparisons from a year with prior, whereas 0:15:59.160 --> 0:16:01.840 the reverse is true for the breaking mortar side. Now, 0:16:01.880 --> 0:16:05.560 I'd say the leveling field is pretty balanced. You're going 0:16:05.600 --> 0:16:08.000 to have people returning to stores. There's always going to 0:16:08.040 --> 0:16:10.640 be room for stores because people do need that last 0:16:10.640 --> 0:16:13.480 minute thing and they do enjoy shopping this certain extent. Still, 0:16:14.000 --> 0:16:16.480 though it's going to be more bounced, we see e 0:16:16.480 --> 0:16:21.080 commerce penetration rising. To keep in mind that it was, 0:16:21.160 --> 0:16:23.800 you know, below twenty percent just a few years ago, 0:16:24.080 --> 0:16:26.120 So there is still a step up in e commerce. 0:16:26.160 --> 0:16:28.680 But there is a place for stories too, you know. 0:16:28.680 --> 0:16:31.320 Putuma just came back from two weeks of vacation and 0:16:31.520 --> 0:16:34.080 I'm kind of counting down the months and when I 0:16:34.080 --> 0:16:36.080 can take another and I realized, you know, look, I've 0:16:36.120 --> 0:16:38.280 taken all my days off for the year. And I said, well, 0:16:38.280 --> 0:16:40.960 we only actually have four months of the year left, 0:16:41.320 --> 0:16:43.760 which means that maybe it's not too early start talking 0:16:43.760 --> 0:16:46.160 about the holiday season. Do you think it's too early 0:16:46.160 --> 0:16:48.240 talking about the holiday season and what should we be 0:16:48.240 --> 0:16:50.240 expecting in just a few months down the road on 0:16:50.240 --> 0:16:53.560 the retail space, I always think it's too early. When 0:16:53.560 --> 0:16:56.480 we started talking about one of those Halloween and stores. 0:16:57.320 --> 0:16:59.440 I see Halloween and stores when I go in right now, 0:16:59.480 --> 0:17:03.800 and Sammy not even over the January. I'm like, all right, 0:17:03.800 --> 0:17:08.360 when's Christmas? No? But I think you know clearly two 0:17:08.440 --> 0:17:10.840 ages all about the holidays, right, and I think it's 0:17:10.840 --> 0:17:13.040 all going to be dependent on inventory and the help 0:17:13.080 --> 0:17:15.359 of the consumer. We are at a point where the 0:17:15.359 --> 0:17:18.760 consumer has been spending, but largely the spund has shifted 0:17:18.800 --> 0:17:21.960 towards travel and experiences because that's where they had pent 0:17:22.040 --> 0:17:25.159 up demand. And on the other hand, inflation is curving 0:17:25.240 --> 0:17:29.359 spend of consumer staples of food and just um, really 0:17:29.400 --> 0:17:32.520 shifting towards those areas out of discretionary apparel sending. We 0:17:32.760 --> 0:17:35.200 saw that at Walmart, we saw that at Target. We've 0:17:35.200 --> 0:17:38.800 seen that across the board, even other retailers. They're citing 0:17:38.840 --> 0:17:41.960 that there is pressure on the low income consumer. That's 0:17:41.960 --> 0:17:44.000 the first sign of a recession. If you look back 0:17:44.040 --> 0:17:48.080 to prior recessions, the first consumer de fault is the 0:17:48.119 --> 0:17:50.919 low income consumer. And we're now seeing signs of slop. 0:17:51.320 --> 0:17:53.200 I don't know when we get into a recession, but 0:17:53.359 --> 0:17:56.320 early signs are there as we speak today. All Right, 0:17:56.359 --> 0:17:58.720 put them good stuff, we appreciate it. Put them goyal 0:17:58.800 --> 0:18:06.280 senior analysts covering all things retail for Bloomberg Intelligence. You know, 0:18:06.520 --> 0:18:09.760 my inbox this week end with the research from Wall 0:18:09.800 --> 0:18:12.040 Street was kind of cautious on the market. A lot 0:18:12.080 --> 0:18:14.640 of Wall Street folks are saying, all right, pause, hit 0:18:14.680 --> 0:18:17.080 the brakes here. We still got a fed raising rates. 0:18:17.160 --> 0:18:21.360 This rally in the market may need to take a pause. Uh. 0:18:21.480 --> 0:18:23.640 I remember the days when Wall Street analysts just said 0:18:23.640 --> 0:18:26.440 bye bye bye. Chanellie Basket, wall Street reporter for Bloomberg News, 0:18:26.520 --> 0:18:29.760 joins us here in our Bloomberg internactive broker's studio. So 0:18:29.840 --> 0:18:31.840 it feels like the streets a little bit more bearish, 0:18:31.840 --> 0:18:34.840 a little bit more cautious on this rally we've seen. 0:18:34.960 --> 0:18:37.000 Cautious is definitely the word that I would use, and 0:18:37.040 --> 0:18:39.200 I would think back to what had happened last week. 0:18:39.240 --> 0:18:41.480 We had talked to Greg Fleming, the CEO of Rockefeller, 0:18:41.560 --> 0:18:44.120 and he said that's where his clients are. I'd even 0:18:44.119 --> 0:18:46.360 look at more data. For example, you have liz Ane 0:18:46.359 --> 0:18:50.160 Saunders really pointing out here, that's uh. Los Ane Saunders 0:18:50.160 --> 0:18:52.840 of Schwab pointing out that hedge funds are not really 0:18:52.920 --> 0:18:55.439 letting go of short bets and that their net futures 0:18:55.440 --> 0:18:58.440 positioning for the SMP five hundred are near the lowest 0:18:58.480 --> 0:19:02.359 level since June. Money. That's an interesting thing to point out. 0:19:02.400 --> 0:19:04.480 And what else is happening when you look at options 0:19:04.480 --> 0:19:08.320 market SEEFTC data also shows sizeable and that short positioning 0:19:08.640 --> 0:19:11.159 in so for future. So that is the library replacement. 0:19:11.240 --> 0:19:14.439 So that is increasingly hawkish. I don't like that library 0:19:14.440 --> 0:19:19.960 replacement at all. The other day man loans on work 0:19:20.119 --> 0:19:23.320 for thirty five years live word, plus I have just 0:19:23.400 --> 0:19:26.240 the right guests for you to talk all day about. 0:19:26.560 --> 0:19:28.240 I don't think that's a I don't think that's a 0:19:28.240 --> 0:19:31.640 contrarian take though. I feel like it's pretty consensus. We want. 0:19:31.720 --> 0:19:34.600 This is like market plumbing. We'll get into the cooler funners. 0:19:34.800 --> 0:19:39.040 Radio audience is like, what's that? I like the geeky stuff, 0:19:39.240 --> 0:19:42.680 but listen. All of this is just to say that 0:19:42.720 --> 0:19:45.760 there are more expectations about a hawk is freed and 0:19:46.440 --> 0:19:50.760 conversely uh pressure on the stock market in light of that, 0:19:50.920 --> 0:19:54.399 plus more catalysts that are going into the fall. You 0:19:54.480 --> 0:19:57.000 look at a note that Guggenheim said out last week 0:19:57.040 --> 0:20:00.439 to clients as well, and the idea that docks have 0:20:00.560 --> 0:20:04.880 really been struggling with their two day moving average could 0:20:04.920 --> 0:20:08.320 mean deeper losses ahead for equities. And the point that 0:20:08.359 --> 0:20:11.160 I've been making all year is that for the marginal buyers, 0:20:11.320 --> 0:20:14.280 let's use hedge funds as one of the bigger examples here. 0:20:14.560 --> 0:20:16.600 Some of these hedge funds are down in the first 0:20:16.600 --> 0:20:18.239 half of the year. How much powder do they have 0:20:18.280 --> 0:20:20.800 on the sidelines to spend big in the second half 0:20:20.840 --> 0:20:23.960 of the year. They don't. It's the answer. Yeah, I 0:20:24.400 --> 0:20:28.560 got you. I think what's interesting And you brought this 0:20:28.600 --> 0:20:31.080 point up on the hedge funds story as well, because 0:20:31.119 --> 0:20:33.120 this is actually my chart of the day UM as 0:20:33.160 --> 0:20:36.560 well as that CFTC positioning really talks about how people 0:20:36.600 --> 0:20:39.919 have been more and more short on the SMP five hundred, 0:20:40.119 --> 0:20:42.960 even though you've seen the rally just kind of skyrocket 0:20:42.960 --> 0:20:46.160 were from the low. So it's interesting that hedge funds, though, 0:20:46.160 --> 0:20:48.440 are still kind of holding onto it. And they would 0:20:48.480 --> 0:20:51.640 argue that perhaps the rallies driven more by retail. We're 0:20:51.680 --> 0:20:53.679 smart money saying well, no, I don't believe in it, 0:20:53.760 --> 0:20:56.159 and it's smart money saying they don't believe in it, 0:20:56.320 --> 0:20:58.240 or are they afraid to dip in. I was talking 0:20:58.280 --> 0:21:00.520 to a big hedge fund manager last week and they 0:21:00.520 --> 0:21:02.639 were saying, listen, I just don't see a pitch that 0:21:02.680 --> 0:21:05.040 I can hit at yet, and I don't have enough 0:21:05.040 --> 0:21:07.280 conviction here. So even some of the smartest guys in 0:21:07.280 --> 0:21:09.320 the room are sitting there saying that you can look 0:21:09.320 --> 0:21:11.680 at the data both ways. You can. You you don't 0:21:11.720 --> 0:21:14.000 want to fight the rally. You lose money that way. 0:21:14.320 --> 0:21:16.000 You don't want to get into the rally because you 0:21:16.040 --> 0:21:18.600 could also lose money that way. And so that is 0:21:18.640 --> 0:21:21.160 the conundrum on Wall Street today. And so what you're 0:21:21.160 --> 0:21:24.000 setting up for is for the banking side of things. 0:21:24.359 --> 0:21:27.560 If you look at if volatility kind of stays low here, 0:21:27.680 --> 0:21:30.479 you can see some of the activity come back. Data underwriting, 0:21:30.520 --> 0:21:32.359 equity and writing all the things that we've lost all 0:21:32.480 --> 0:21:35.560 year that have made the bank's money uh m, and 0:21:35.640 --> 0:21:39.080 a advisory work once again. And that's the stuff that 0:21:39.080 --> 0:21:41.840 could really fuel Wall Street into the second half. If 0:21:41.840 --> 0:21:44.160 you have deals come back, you have merger are come back. 0:21:44.280 --> 0:21:46.920 If you have all these activists asking for split ups, 0:21:46.920 --> 0:21:49.480 you also have deals come back. So a little bit 0:21:49.480 --> 0:21:52.320 of calmness would be the hope for Wall Street for 0:21:52.320 --> 0:21:54.680 the second part of this year. I guess less than 0:21:54.840 --> 0:21:58.119 half of the year left. Um, but you know you 0:21:58.160 --> 0:22:01.520 were talking about it, Paul Pain still on a lot 0:22:01.520 --> 0:22:04.000 of corners on Wall Street, Credit Sweets being the poster 0:22:04.160 --> 0:22:06.760 child of that. A lot of banks also suffering a 0:22:06.760 --> 0:22:09.640 lot of losses. I mean Credit Swiss, my former employer. 0:22:09.680 --> 0:22:12.760 I worked there for a while. They just have management 0:22:12.760 --> 0:22:15.200 problems after management problem, aftter management problems in the stocks 0:22:15.200 --> 0:22:18.840 at you know, five h was five Swiss. Frank's yeah, 0:22:18.920 --> 0:22:23.840 just brutal um talking about hollowing out. As we put 0:22:23.840 --> 0:22:26.600 in our Bloomberg Big Take story, the investment bank kind 0:22:26.640 --> 0:22:30.080 of backing away from everything with the exception of advisory work, 0:22:30.600 --> 0:22:34.040 and so they really would not be an investment bank anymore. 0:22:34.080 --> 0:22:36.320 They would be I guess, just really a wealth advisor. 0:22:36.320 --> 0:22:38.719 I guess wealth advisor. And that's something that UBS has 0:22:38.720 --> 0:22:41.400 struggled with a long time. Remember the new CEO and 0:22:41.640 --> 0:22:45.120