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

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

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Speaker 1: Eastern on focarplaying and broid Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: All right, let's get to Adobe worst performing snack on

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Speaker 2: the SMP down almost fourteen percent week sales outlook for

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Speaker 2: the current quarter. That's the key, and it's all about

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Speaker 2: worries now about AI startups being a big threat to

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Speaker 2: the company. So let's get more here with Brody Ford.

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Speaker 2: He joins us. He covers tech for Bloomberg. So what happened?

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Speaker 3: What happened yees last year? If you asked investors who's

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Speaker 3: gonna benefit from AI in twenty twenty four, they'd say

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Speaker 3: Microsoft and Adobe. But after last night, it might be

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Speaker 3: just Microsoft for now, right, because Adobe has invested massively

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Speaker 3: in new AI features to improve a lot of processes

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Speaker 3: in Photoshop, Illustrator, other programs, but we're not seeing a

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Speaker 3: revenue uplift yet. Right, Investors expected that these new features

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Speaker 3: would drive a lot more financials in the new year,

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Speaker 3: and we're just not seeing that. Yet, and they are

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Speaker 3: not keen to weight at this point.

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Speaker 4: I mean, was that reasonable for investors to think that

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Speaker 4: the revenues would be coming in at this point because

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Speaker 4: I feel like they've just developed these new products, like,

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Speaker 4: you know, give them a minute.

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Speaker 3: Yeah, I mean, I think management's been pretty consistent in saying,

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Speaker 3: right now, we're pricing for adoption. We're trying to just

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Speaker 3: get more users. But I just think it's not quick

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Speaker 3: enough for investors, especially when there's this sense that many

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Speaker 3: other AI startups out there are not moving so conservatively. Right,

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Speaker 3: they're going to create tools like you all saw open

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Speaker 3: AI's new Sora, which allows you to generate video right.

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Speaker 3: Something like that gave investors a lot of anxiety because

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Speaker 3: they said, whoa are people even going to need to

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Speaker 3: pay for Adobe's tools if this becomes mainstream? So that's

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Speaker 3: where a lot of this anxiety is stemming from.

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Speaker 2: So also, don't they need people like me to not

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Speaker 2: use it for free and come in and pay for stuff?

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Speaker 2: How are they going to, like, aside from the AI conversation,

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Speaker 2: how are they going to make me, who wouldn't know

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Speaker 2: Adobe if it hit me in the face, come in

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Speaker 2: and start to pay for some things.

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Speaker 5: Yeah.

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Speaker 3: So, I mean their primary user base is the kind

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Speaker 3: of creators graphic design studios. Right, they are increasingly trying

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Speaker 3: to break into people like you and me who might

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Speaker 3: need to every so often, like you know, edit the

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Speaker 3: margins on a photo or recolor something. And so they've.

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Speaker 2: Invested Kate Middleton. I mean, it's the whole thing, right, exactly, exactly.

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Speaker 3: Yeah, if they had a more unscrupulous marketing department, I'm

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Speaker 3: sure they would have leaned into.

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Speaker 2: Oh my god, yeah, don't do what she did services.

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Speaker 3: If she had had Adobe Firefly, that never would have happened.

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Speaker 2: That's pretty funny.

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Speaker 6: Yeah.

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Speaker 3: So, yes, I mean they have invested more trying to

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Speaker 3: get average users using their stuff. That was a big cornerstone.

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Speaker 3: I don't know if you all remember they tried to

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Speaker 3: buy this company, Figma, for twenty billion dollars. That was

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Speaker 3: part of that planned acquisition that, Hey, this company has

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Speaker 3: been good at putting these complicated tools on the web,

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Speaker 3: making it simple, making it so that average people can

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Speaker 3: use them. We've had trouble with that. Let's just buy them.

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Speaker 4: That's an interesting idea, but I guess I want to

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Speaker 4: get your take on the bigger picture here. So in

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Speaker 4: the long term, AI, do we really need Adobe software?

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Speaker 4: I mean, is this the tail of a buggy whit

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Speaker 4: manufacturer grasping it the last straw when the whole technology

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Speaker 4: has moved on.

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Speaker 3: Yeah, And there was this rare, candid moment on an

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Speaker 3: earnings call last night where they kind of had this

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Speaker 3: argument a little bit, right, some of these Wall Street

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Speaker 3: analysts said, we understand that in the near term people

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Speaker 3: will need Adobe's tools to edit the video, edit the photo.

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Speaker 3: In the long term, are you going to get displaced entirely?

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Speaker 3: Management pretty much said that you will always need something

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Speaker 3: to you know, you're not going to generate a whole

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Speaker 3: video just with a prompt and publish out there. I

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Speaker 3: think the quote the CEO use was the next Oppenheimer.

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Speaker 3: It's not going to be created with a prompt. But

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Speaker 3: it's an open question right as the decades go on

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Speaker 3: the current format of Adobe's tools, which is, you know,

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Speaker 3: these kind of heavyweight applications on the desktop, think about

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Speaker 3: like Photoshop, video editing, picture editing. Will these formats really

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Speaker 3: still exist once you can generate so much more media

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Speaker 3: with a prompt?

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Speaker 2: But you know, I also I have two schools a

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Speaker 2: thought on that, like one. People who want to do that.

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Speaker 2: They want to do that, like they're creative people that

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Speaker 2: enjoy it. They don't want to just put in the

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Speaker 2: word flower and like get a picture. Right, However, do

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Speaker 2: they have tools where you can put in the word

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Speaker 2: flower and create a picture? Like are they working towards that?

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Speaker 5: Oh?

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Speaker 3: Yeah, I mean that's that.

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Speaker 2: Is they're in it like they're in it. Yeah yeah.

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Speaker 3: I mean the Adobe has present the entire last year

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Speaker 3: working quickly because other AI startups did this first, to

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Speaker 3: make these kind of tools where you can type in

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Speaker 3: you know, yeah, like four journalists sitting around a radio

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Speaker 3: booth and he generates the image.

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Speaker 2: Pretty well, don't do that. You need us because we

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Speaker 2: are unique and awesome. Okay, go ahead, Sorry, No.

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Speaker 3: To your point, do creatives like it? It gives them

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Speaker 3: some anxiety, no doubt, but like I mean, they need

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Speaker 3: to get paid, right, and at the end of the day,

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Speaker 3: if the bosses are saying that, hey, this is a

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Speaker 3: pretty good tool, we're going to be able to create

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Speaker 3: things faster. The incentives are all there. I mean, I

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Speaker 3: don't think the idea that people are anxious because a

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Speaker 3: I might replace their jobs could reduce the adoption of it.

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Speaker 3: I don't think that will be really a prohibitor here.

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Speaker 4: I mean, that's so interesting though, because ever since this

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Speaker 4: generative AI mania came about, the whole question is what's

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Speaker 4: this going to do to jobs? And a lot of

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Speaker 4: the response has always been it'll always be people working

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Speaker 4: in conjunction with AI. But the thing that makes me

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Speaker 4: think about your Oppenheimer comment that the that was made

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Speaker 4: on the call, I think that's a very telling comment

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Speaker 4: because that Academy award went to the one person, not

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Speaker 4: the one person in Hollywood, a prominent person in Hollywood

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Speaker 4: who champions the old school way of doing things, shooting

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Speaker 4: things just on film. And so that kind of leads

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Speaker 4: me down this path that thinking, yeah, the Adobe software

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Speaker 4: might stick around for a while, but it might just

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Speaker 4: become very niche or something for a very specified sort

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Speaker 4: of area of use, whereas the rest of the world

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Speaker 4: is just going to move on with doing things with

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Speaker 4: a couple of prompts totally.

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Speaker 3: And the big question is like, will companies reinvest right

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Speaker 3: because these are labor saving technologies. Will it be that, hey,

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Speaker 3: I'm able to do more with each person so we

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Speaker 3: can expand the scope of what we do, or are

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Speaker 3: we going to do what we currently do work wise

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Speaker 3: with less people and just save a bunch of money

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Speaker 3: and employ less. And I think we're deluding ourselves if

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Speaker 3: we don't think that companies are just going to cut labor,

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Speaker 3: at least some of them will.

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Speaker 2: Yeah, what else are you looking at?

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Speaker 5: Like?

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Speaker 2: What else is driking is built in your boat right now?

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Speaker 3: I mean, I think think a really big one is

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Speaker 3: how soon we are able just to generate these videos

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Speaker 3: with prompts?

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Speaker 5: Right?

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Speaker 3: I mean this demo we saw from open Ai was

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Speaker 3: such a kind of extreme example of this technology, And

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Speaker 3: the big question is is this really ready for prime

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Speaker 3: time or is this one of these demos that you

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Speaker 3: show that isn't actually going to be in our hands

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Speaker 3: for a couple of years.

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Speaker 2: Yeah.

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Speaker 4: I guess that's always the question though, And it's like

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Speaker 4: we're leaving the hyper we're lapping up the hype, any

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Speaker 4: example of how cool this could possibly be. But this

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Speaker 4: is the question for all companies. You know, you've got

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Speaker 4: to start putting real money behind it. And sometimes it

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Speaker 4: just like doesn't work very well, or there's tweaks in

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Speaker 4: the machine that makes you think, like I don't like

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Speaker 4: this response.

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Speaker 3: It looks well, I mean, and I'm sure you also

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Speaker 3: have the controversy of Google's equivalent of the image generation.

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Speaker 3: It had a lot of backlash in recent weeks because

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Speaker 3: it would, you know, if you typed in a certain

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Speaker 3: historical element. You know, some of these tools are made to,

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Speaker 3: you know, emphasize diversity, and some folks there was some

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Speaker 3: backlash to that and historical contacts, contacts or maybe it

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Speaker 3: wouldn't be accurate. And so there is a lot of

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Speaker 3: people very closely scrutinizing the outputs of these machines, right,

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Speaker 3: I mean, there's no precise way to make everybody happy

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Speaker 3: with these Yeah, I.

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Speaker 4: Guess it's a lot of programming needs to keep happening,

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Speaker 4: and it's a question of whether the money will still

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Speaker 4: be there from companies to pay for it.

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Speaker 6: Yeah.

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Speaker 2: Well, Brodie, thanks lot, You're awesome. I love having you on.

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Speaker 2: Your depth of knowledge is great. Brody Ford coming in

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Speaker 2: their Bloomberg Tech and you're looking at Adobe where to

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Speaker 2: go had it and it went away. It's down about

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Speaker 2: seventeen percent. Yeah, it's real, down around seventeen percent. Fourteen

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Speaker 2: Thank you. How to buy back though as well? It's like, hey, guys,

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Speaker 2: stick around, stick around. We know we're not delivering what

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Speaker 2: you want right now, but please stick around for that.

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Speaker 2: I mean, I do think your point is taken, Jen

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Speaker 2: that like everyone seems to say, you will use AI,

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Speaker 2: but you need humans to help it. It's not maybe

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Speaker 2: going to be as binary as maybe we thought a

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Speaker 2: couple of years ago.

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Speaker 4: You need humans. But maybe to Brodie's point, you don't

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Speaker 4: need all those humans, right, just a couple of humans.

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Speaker 2: But which is why you need people like us to

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Speaker 2: want to diversify into you know, photoshop to do that,

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Speaker 2: Like my dad does that, Like he takes photographs, he

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Speaker 2: likes it, and they need tools around in it. Like

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Speaker 2: you need those people to kind of pay for that

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Speaker 2: stuff that is irrespective of AI. But is that really

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Speaker 2: going to move the needle then for a company like Adobe.

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

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Speaker 1: weekdays at ten am Eastern on applecar Play and Android

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Speaker 1: Auto with a Bloomberg Business Act. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station,

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Speaker 1: Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: Apparently Boeing is now advising airlines to check the cockpit

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Speaker 2: seats on sevent eighty seven Dreamliner jets after a seat

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Speaker 2: mishap likely pushed a pilot into the controls, calling a sudden,

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Speaker 2: terrifying plunge on a flight to New Zealand this week.

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Speaker 2: The flight attendant was serving a meal, and therefore all

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Speaker 2: of this it happening. George Ferguson Bloomberg Intelligence Senior Aerospace,

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Speaker 2: Defense and Airlines analyst joins us, Now, I mean this

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Speaker 2: feels like, okay, yeah, it was a mess.

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Speaker 6: Up, big deal.

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Speaker 7: I'm sorry to catch up.

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Speaker 2: Big deal or no.

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Speaker 7: No, I don't think it's a big deal. I mean,

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Speaker 7: if you were on the flight, obviously it was a

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Speaker 7: big deal. And so we hope everybody's safe and okay

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Speaker 7: after that. But you know, the seventy seven has been

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Speaker 7: operating for a lot of years. Now, this is the

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Speaker 7: first of this incident I've heard of. It sounds like

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Speaker 7: there might not have been a safety device in place

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Speaker 7: that allowed the seat to be adjusted, and so my

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Speaker 7: guess is Boeing, out of abundance of caution, has pushed

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Speaker 7: out to the fleet. You know, hey, make sure that

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Speaker 7: this plastic cover, whatever safety piece is in place, and

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Speaker 7: you don't adjust the seat by mistake. But again, I

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Speaker 7: think it's not a major issue right now, there's definitely

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Speaker 7: a heightened amount of awareness around anything that happens in

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Speaker 7: a Boeing airplane.

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Speaker 1: I think it's a little bit of that.

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Speaker 4: I take your point that it's not a major issue

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Speaker 4: in terms of this particular type of jetliner. But I

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Speaker 4: do wonder about what the rita cross is going to

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Speaker 4: be for the average consumer, because they're not short of

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Speaker 4: news from Boeing that they've seeming to have one mishap

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Speaker 4: after another, and I wonder if consumers are really going

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Speaker 4: to be able to make the distinction between this jetliner

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Speaker 4: versus that jetliner.

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Speaker 7: Yeah, agreed, I mean I've seen, you know, a lot

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Speaker 7: of press on every little thing that happens on any

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Speaker 7: Boeing jet right now. I think, you know clearly it's

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Speaker 7: getting a lot of clicks, and so the media is

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Speaker 7: going after pretty pretty hard. I think at this point,

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Speaker 7: where still still in this situation, where as the problems

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Speaker 7: with the Max fade, I think some of the demand

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Speaker 7: for these stories should fade. I don't think most people

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Speaker 7: are going to the airport worried about what airplane they're flying.

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Speaker 7: I talk to a lot of people, you know about

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Speaker 7: where they're flying and what they're flying all the time.

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Speaker 7: I'm an aerospace geek, so I'm still hearing people that

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Speaker 7: aren't in aerospace say, hey, you know, yesterday I knew

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Speaker 7: I flew a Max. But they're still getting on the airplane.

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Speaker 7: So I think, you know, we're not at that point

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Speaker 7: yet where people are sort of rejecting flying Boeing products,

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Speaker 7: and that's a positive for Boeing.

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Speaker 5: Obviously.

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Speaker 2: I think Jen for like a hot minute, maybe it

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Speaker 2: was on Priceline, you could search the type of aircraft

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Speaker 2: after I think the panel blue off and stuff, and

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Speaker 2: you could search your aircraft.

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Speaker 6: You couldn't.

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Speaker 4: That's got to be totally a function of consumer demand.

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Speaker 2: Yeah, yeah, I wonder how many people actually cared or

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Speaker 2: looked at it. To George's point, George, in the meantime,

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Speaker 2: we learned a lot about the airline industry this week.

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Speaker 2: There was a conference I think was JP Morgan right

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Speaker 2: then airlines, particularly Southwest, was warning of in essence, some

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Speaker 2: slowing demand. What are the order books like for Boeing, Like,

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Speaker 2: how are they navigating that with their customers?

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Speaker 7: So, I mean the order books are really you know,

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Speaker 7: the backlog is very strong for Boeing and so like

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Speaker 7: on the seven thirty seven, five six years worth of

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Speaker 7: backlog on that airplane. That's why it's so disappointing when

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Speaker 7: you know one of their major customers like Southwest, comes

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Speaker 7: out and says, you know, we've been told by Boeing,

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Speaker 7: we're not gonna be able to get this many jets,

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Speaker 7: all the jets we wanted this year. There's a lot

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Speaker 7: of work to be done for Boeing and that's part

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Speaker 7: of their recovery story is increasing build rates, which is

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Speaker 7: going to boost their profits, boost their cash flow. A

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Speaker 7: lot of folks were looking for that to happen this year.

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Speaker 7: When someone like Southwest comes out and says we're not

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Speaker 7: gonna get all the airplanes this year, that means we're

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Speaker 7: kind of set back another year. But that you know,

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Speaker 7: they need to start to build that backlog and keep

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Speaker 7: those customers happy so they don't go away. The longer

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Speaker 7: the delays happen, the more risk there is the customers

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Speaker 7: haven't out in their contract and can walk away from

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Speaker 7: from their orders. But the backlogs are very strong for

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Speaker 7: the seven thirty seven and the seven eighty seven. It's

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Speaker 7: major competitors, the A three fifty, the seven eighty seven

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Speaker 7: has a larger backlog than the A three fifty bid

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Speaker 7: in service a long time. Airlines love it so right now,

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Speaker 7: backlogs are very strong about they just have to start

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Speaker 7: building airplane as well.

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Speaker 4: Looking at the Boeing stock year today, it's the second

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Speaker 4: worst performer in the S and P five hundred, I mean,

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Speaker 4: when is the stock story going to start to turn around?

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Speaker 2: You know?

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Speaker 7: I mean that's always hard to say. I think you

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Speaker 7: need obviously some level of sentiment to change for people

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Speaker 7: to be excited about this. You know, I personally think

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Speaker 7: that this purchase of Spirit Aerosystems that's been floated, I

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Speaker 7: personally think getting that done could put a bottom under

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Speaker 7: the problems Boeing's having in their manufacturing process. And getting

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Speaker 7: that bottom underneath, I think, you know that this quality

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Speaker 7: story that's going to be key, I think to keeping

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Speaker 7: investors happy.

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Speaker 2: All right, George, really appreciate it. Thanks so much for

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Speaker 2: happing on with us. George Ferguson Bloomberg Intelligence, senior Aerospace,

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Speaker 2: Defense and airlines analysts.

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

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Speaker 1: weekdays at ten am Eastern on Effo card Play and

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Speaker 1: then Broudoto with the Bloomberg Pistons us a list non

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Speaker 1: demand wherever you get your podcasts, or watch us live

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Speaker 1: on YouTube.

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Speaker 2: The University of Michigan sentiment, as John Tiger was just reporting,

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Speaker 2: falling just a bit, let's get more data on it

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Speaker 2: with Joanne Chu, University of Michigan Surveys of Consumer Director.

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Speaker 2: She's breaking it down right now. Okay, So, Joanne, what

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Speaker 2: happened here?

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Speaker 5: Essentially not a whole lot. Consumer sentiment has been remarkably

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Speaker 5: stable over the last three months. We've had very little

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Speaker 5: movement since January, and that's following the enormous gains that

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Speaker 5: happened in November and December, December, November and January. So

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Speaker 5: not a whole lot of change. Consumers don't really perceive

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Speaker 5: any sort of clear developments in the economy. Possibly more importantly,

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Speaker 5: inflation expectations also remarkably stable. Consumers still expect inflation to

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Speaker 5: slow down, both in the year ahead as well as

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Speaker 5: the long term.

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Speaker 4: You know, we've been talking so much on this program

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Speaker 4: about where investors are expecting the FED to go. Can

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Speaker 4: you dig in a little bit to what you think

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Speaker 4: consumers read it on what what interest rate re cuts

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Speaker 4: are coming. I mean, do they feel confident? Are they

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Speaker 4: a little bit more enthusiastic than investors are?

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Speaker 5: Perhaps consummers are expecting broadly speaking, they are expecting interest

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Speaker 5: rates to come down over the next year. And you know,

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Speaker 5: that was a pretty sharp change in consumer views or

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Speaker 5: consumer expectations over interest rates over the last three to

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Speaker 5: six months. So even though most consumers really aren't paying

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Speaker 5: that close attention to developments and financial markets, more more broadly,

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Speaker 5: they do expect the interest rates that they face to

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Speaker 5: come down. We don't really know much about what they're

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Speaker 5: thinking in terms of timing, but every month there is

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Speaker 5: an increasing number who expect interest rates to soften.

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Speaker 2: I mean, do we read anything from the fact that

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Speaker 2: things are just slowing over time? Like, is this sort

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Speaker 2: of the tightening that we've been waiting for and the

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Speaker 2: consumer sentiment a bit lighter so they just buy and

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Speaker 2: spend less, Like, is this kind of what we've been

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Speaker 2: waiting for for the last year and a half. It's possible,

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Speaker 2: but it's the part of the thing.

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Speaker 5: Is that, excuse me, part of the reason that consumers

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Speaker 5: are not really moving a whole lot in the sentiment

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Speaker 5: is that there's a good chunk of consumers who are

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Speaker 5: thinking about the election ahead, and you and a lot

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Speaker 5: of consumers are telling us spontaneously that the trajectory of

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Speaker 5: the economy very much depends on the result of November's election.

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Speaker 5: So I think there are people who are just reserving

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Speaker 5: judgment right now. Whether that's going to affect their spending,

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Speaker 5: it's a little bit hard to say, because I think

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Speaker 5: you know, even even though they're reserving judgment, you know

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Speaker 5: that they they're they're still expecting.

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Speaker 2: Two possible outcomes.

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Speaker 5: And uh, and you know what we'll see as in

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Speaker 5: the months ahead as it comes into focus, if that

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Speaker 5: starts to move sentiment one way or the other.

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Speaker 4: I noticed that in your data you do pull Republicans

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Speaker 4: versus Democrats versus independence on how they're feeling. So is

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Speaker 4: there any interesting change there this month?

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Speaker 5: I would say it's a little early to say, because

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Speaker 5: you know, at the preliminary reading, we don't want to

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Speaker 5: draw too many conclud out of small samples.

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Speaker 2: You're divided into three different parties.

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Speaker 5: What I will say is that this general stability that

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Speaker 5: we're seeing, we see that across party as well. So

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Speaker 5: the the enormous gains in sentiment that we saw in

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Speaker 5: November to January, and then the stability between January and March.

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Speaker 2: All three of the both of those.

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Speaker 5: Patterns are visible across Republican's Independence as well as Democrats.

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Speaker 2: Interesting. Hey, Joan, we love it. Thank you for the

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Speaker 2: incident analysis. It really helps us as we get through

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Speaker 2: all the data. Here to insue of University of Michigan.

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

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Speaker 1: weekdays at ten am Eastern on applecar Play and Androud

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Speaker 1: Auto with the Bloomberg Business App. You can also listen

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Speaker 1: live on Amazon Alexa from our flagship New York station.

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Speaker 1: Just say Alexa play Bloomberg eleven thirty.

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Speaker 2: All right, let's get the take on a market here.

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Speaker 2: My daughter's making animal sounds. Sit down, don't stand on

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Speaker 2: the chair. All right, looking at a market here where

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Speaker 2: we're training a little bit heavy. Yes, it's options expiration,

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Speaker 2: triple witching, volumes super high. But you know, I'm trying

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Speaker 2: to understand if we're gonna be looking for bad news

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Speaker 2: or good news and what the reaction function is for stocks.

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Speaker 2: So Dana Dioria is co CIO of Investment and she

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Speaker 2: joins us. Now, Dana, what are we waiting for at

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Speaker 2: this point, like you need to be selling into this.

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Speaker 2: Do you buy whatever?

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Speaker 8: Dip?

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Speaker 6: But what do we do? Yeah, it's a great question,

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Speaker 6: you know, I think, well, we've been buying. There's been

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Speaker 6: there's been plenty of buying going on in this market.

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Speaker 6: I think actually, I think, you know, what we're seeing

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Speaker 6: now is of course the market slowly but surely getting

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Speaker 6: to where it's hard to understand why we maybe didn't

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Speaker 6: start there, right, you know, the market contending with it's

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Speaker 6: probably not six right, cuts we're past that question, is

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Speaker 6: is it even three? At this point? All all sql right,

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Speaker 6: not knowing what we know now, And you know, if

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Speaker 6: that's the case, you know, I guess the question becomes,

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Speaker 6: does it finally start hurting some of these growthier stocks

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Speaker 6: where in in spite of the fact they have you know,

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Speaker 6: longer dated cash flows. We know, traditional would say that

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Speaker 6: higher for longer, you know, should be more painful for

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Speaker 6: them if they're self funded, they're really not feeling that pain.

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Speaker 6: I think, you know, it's kind of more in small

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Speaker 6: caps is an interesting place to be thinking about their

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Speaker 6: more interest rate sensitive you know, does higher for longer

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Speaker 6: how does that impact them? But there's pros and cons there.

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Speaker 6: You know, my take is actually to keep tilting a

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Speaker 6: little bit into that space, especially if you can wait

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Speaker 6: it out. They may be interest rate sensitive, but if

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Speaker 6: inflation comes back, you know, small value in particular tends

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Speaker 6: to outperform inflation. So there's push and pull in this market.

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Speaker 6: But I think the overall theme is, Wow, maybe we're

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Speaker 6: not going to get these these rate cuts we were

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Speaker 6: hoping for.

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Speaker 5: I mean, can you.

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Speaker 4: Talk a little bit about your views on the of

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Speaker 4: the balance of risks for the Fed? I mean, do

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Speaker 4: they have a lot to lose by waiting a lot

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Speaker 4: to lose by moving too quickly.

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Speaker 6: I think they have more to lose by moving too quickly.

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Speaker 6: You know, their mandate is employment and inflation, and really

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Speaker 6: both of those are signaling the same thing that it's

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Speaker 6: not time to cut right. So we have PPI coming

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Speaker 6: in a little higher than we wanted core, you know,

439
00:21:09,440 --> 00:21:13,320
Speaker 6: inflation a little higher. Obviously, these are not extremes. We're

440
00:21:13,320 --> 00:21:16,080
Speaker 6: not seeing a bounce back or something in inflation yet,

441
00:21:16,160 --> 00:21:19,280
Speaker 6: but we are seeing stickiness to inflation. And you know,

442
00:21:19,320 --> 00:21:22,359
Speaker 6: the history suggests inflation does kind of come in waves.

443
00:21:22,359 --> 00:21:24,640
Speaker 6: We've seen a lot of macro analysts talk about that

444
00:21:25,560 --> 00:21:28,120
Speaker 6: you know. So the FED of course is well versed

445
00:21:28,119 --> 00:21:31,200
Speaker 6: in that, so they're probably worried about that. They're also

446
00:21:31,359 --> 00:21:34,360
Speaker 6: looking at these employment reports. Unemployment ticks up a little bit,

447
00:21:34,600 --> 00:21:37,120
Speaker 6: but you know, initial job those claims look great, right,

448
00:21:37,119 --> 00:21:40,200
Speaker 6: The employment picture looks pretty sound. So if your mandate

449
00:21:40,400 --> 00:21:43,520
Speaker 6: is employment inflation, both of those signals are saying why

450
00:21:43,520 --> 00:21:45,520
Speaker 6: are we cutting? Right now? I will say, look on

451
00:21:45,560 --> 00:21:47,399
Speaker 6: the other side, well, one other signal saying why are

452
00:21:47,400 --> 00:21:49,880
Speaker 6: we cutting, of course, is the stock market itself. It's

453
00:21:49,920 --> 00:21:52,680
Speaker 6: not like, you know, we're feeling a lot of pain there.

454
00:21:52,680 --> 00:21:55,480
Speaker 6: We're certainly not small you know, areas of the market,

455
00:21:55,760 --> 00:21:58,159
Speaker 6: but not the market overall. I will say, you know,

456
00:21:58,160 --> 00:22:00,840
Speaker 6: if there's you said, pros and cons right the other

457
00:22:00,920 --> 00:22:02,920
Speaker 6: side of it for the FED, if there is some

458
00:22:03,000 --> 00:22:05,479
Speaker 6: and I don't think this is the decisional part, but

459
00:22:05,880 --> 00:22:09,240
Speaker 6: we do have a federal debt that's climbing dramatically. We

460
00:22:09,320 --> 00:22:12,919
Speaker 6: do have cost of you know, maintaining that debt. The

461
00:22:13,000 --> 00:22:15,560
Speaker 6: higher the interest rates, of course, and the more that

462
00:22:15,560 --> 00:22:18,320
Speaker 6: debt rolls over, the worse it is. So you know,

463
00:22:18,400 --> 00:22:20,600
Speaker 6: to the extent that impacts on the FED, that is

464
00:22:20,640 --> 00:22:21,160
Speaker 6: in the mix.

465
00:22:21,680 --> 00:22:24,679
Speaker 2: So if we're dealing with all of this, is it

466
00:22:24,720 --> 00:22:27,600
Speaker 2: a commodity situation that you need to be playing right now?

467
00:22:27,600 --> 00:22:29,560
Speaker 2: I'm just looking at month to date the S and

468
00:22:29,600 --> 00:22:33,399
Speaker 2: P Energy Index is up almost seven percent, whereas you

469
00:22:33,520 --> 00:22:37,920
Speaker 2: have WTI also with a nice move a month to

470
00:22:38,040 --> 00:22:40,000
Speaker 2: date up a little over three percent. It's a little

471
00:22:40,000 --> 00:22:42,600
Speaker 2: softer today, but you know, copper it eleven month high.

472
00:22:42,680 --> 00:22:44,760
Speaker 2: Like if we're in for a period of yep, we're

473
00:22:44,800 --> 00:22:47,080
Speaker 2: gonna get stickier prices. We're not sure where the reaction

474
00:22:47,119 --> 00:22:49,520
Speaker 2: function is from the FED, it's gonna push off rate

475
00:22:49,600 --> 00:22:53,720
Speaker 2: hikes just by the commodity sectors.

476
00:22:53,880 --> 00:22:55,720
Speaker 6: The hot right, there's definitely a camp who would say

477
00:22:55,800 --> 00:22:58,640
Speaker 6: yes to that, and especially too if you think inflation

478
00:22:58,760 --> 00:23:01,520
Speaker 6: might be stickier. Of course, there's a whole you know,

479
00:23:01,720 --> 00:23:03,720
Speaker 6: school that says that that's a place to be to

480
00:23:04,040 --> 00:23:06,879
Speaker 6: tackle inflation. I don't know if I come in really

481
00:23:07,040 --> 00:23:11,160
Speaker 6: in that camp, not to say one way or the other. Obviously,

482
00:23:11,800 --> 00:23:15,240
Speaker 6: demand there's several variables that are an impact on that,

483
00:23:15,720 --> 00:23:19,199
Speaker 6: and energy of course very dominant in that sector. But

484
00:23:19,440 --> 00:23:21,639
Speaker 6: I guess you know, from the standpoint of just what

485
00:23:21,680 --> 00:23:24,520
Speaker 6: am I trying to protect against? You know, the commodity

486
00:23:24,520 --> 00:23:26,920
Speaker 6: sector is pretty volatile. If it's inflation I'm trying to

487
00:23:26,920 --> 00:23:30,120
Speaker 6: protect against. You know, tips is probably a better place

488
00:23:30,160 --> 00:23:33,440
Speaker 6: to be if I'm specifically looking there, and if i'm inequities,

489
00:23:33,440 --> 00:23:36,199
Speaker 6: and as I mentioned, small value in particular, you know,

490
00:23:36,240 --> 00:23:38,119
Speaker 6: I can go there and I have a reason to

491
00:23:39,000 --> 00:23:43,000
Speaker 6: productive capacity, right to earn returns over time there versus

492
00:23:43,040 --> 00:23:45,560
Speaker 6: maybe just you know, betting on a commodity, betting on

493
00:23:46,119 --> 00:23:50,439
Speaker 6: a price increase because of supply demand issues. So my

494
00:23:50,600 --> 00:23:52,960
Speaker 6: personal preference is more along those lines. It's not to

495
00:23:53,000 --> 00:23:56,080
Speaker 6: say you shouldn't be in commodities, but I don't put

496
00:23:56,080 --> 00:23:58,000
Speaker 6: a big stake in the allocation there.

497
00:23:58,400 --> 00:24:00,560
Speaker 4: So just one last question for you. Getting into the

498
00:24:00,600 --> 00:24:03,720
Speaker 4: second half of the year presidential election campaign coming up,

499
00:24:03,760 --> 00:24:07,040
Speaker 4: there could be highly partisan activities going on around there.

500
00:24:07,320 --> 00:24:09,280
Speaker 4: What should equity investors be looking out for.

501
00:24:10,680 --> 00:24:14,920
Speaker 6: Yeah, under statement of the year right, definitely, Well, we'll

502
00:24:14,960 --> 00:24:18,800
Speaker 6: see some partisan ship. You're you're I'm with you one

503
00:24:18,840 --> 00:24:20,960
Speaker 6: hundred percent. Look, I think you know, there's a there's

504
00:24:21,000 --> 00:24:23,560
Speaker 6: a lot of academic evidence, a lot of empirical research

505
00:24:23,600 --> 00:24:26,920
Speaker 6: that says you can draw a good correlation between who's

506
00:24:26,960 --> 00:24:30,960
Speaker 6: in power, whether it's presidency, Senate, you know, House, all

507
00:24:31,000 --> 00:24:34,000
Speaker 6: sorts of every think of the matrix of which which

508
00:24:34,040 --> 00:24:36,560
Speaker 6: in power for each of those, it's all been looked at.

509
00:24:36,720 --> 00:24:41,160
Speaker 6: It's really not definitive which you know, configuration is better

510
00:24:41,200 --> 00:24:44,439
Speaker 6: for markets. Obviously if it was, you'd have that party

511
00:24:44,480 --> 00:24:47,760
Speaker 6: really singing that those those phrases. But so so I

512
00:24:47,760 --> 00:24:49,560
Speaker 6: don't from that perspective, I don't think there's a lot

513
00:24:49,560 --> 00:24:52,160
Speaker 6: of information content. But I think you nailed it. It's

514
00:24:52,240 --> 00:24:55,960
Speaker 6: the volatility, right, It's the fact that the market ball

515
00:24:56,040 --> 00:24:59,040
Speaker 6: and actually you're seeing vix you know, futures in VIX

516
00:24:59,119 --> 00:25:02,399
Speaker 6: reflect this a bit that around October, all of a sudden,

517
00:25:02,600 --> 00:25:04,399
Speaker 6: you know, a spike in volatility is probably coming for

518
00:25:04,480 --> 00:25:06,880
Speaker 6: the market. So I think you're absolutely right. I think

519
00:25:07,000 --> 00:25:10,640
Speaker 6: expect kind of bumping us the election season and as

520
00:25:10,640 --> 00:25:14,000
Speaker 6: we all know too, globally there's a lot of elections

521
00:25:14,040 --> 00:25:17,520
Speaker 6: going on this year, so overall that could be you know,

522
00:25:17,680 --> 00:25:19,119
Speaker 6: not just in the S and P five hundred and

523
00:25:19,320 --> 00:25:21,119
Speaker 6: US indexes, but globally as well.

524
00:25:21,200 --> 00:25:23,600
Speaker 2: All right, Dana, thanks a lot, really appreciated Dana Dioria,

525
00:25:24,080 --> 00:25:27,680
Speaker 2: co Cio of Investment joining us there. But the interesting

526
00:25:27,720 --> 00:25:32,080
Speaker 2: thing is if you played volatility or election volatiler or

527
00:25:32,119 --> 00:25:34,359
Speaker 2: geopolitical risk it hasn't paid off like you had a

528
00:25:34,359 --> 00:25:37,719
Speaker 2: brief momentary thing in twenty sixteen with Brexit. But the

529
00:25:37,760 --> 00:25:40,399
Speaker 2: hedging like window of making money just gets smaller and

530
00:25:40,440 --> 00:25:41,399
Speaker 2: smaller with these things.

531
00:25:41,560 --> 00:25:41,800
Speaker 6: I know.

532
00:25:41,920 --> 00:25:43,520
Speaker 4: So if that's your move, then you've got to think

533
00:25:43,560 --> 00:25:45,520
Speaker 4: of another strategy, because I'm looking at the VIX right

534
00:25:45,560 --> 00:25:47,399
Speaker 4: now and it's at a pretty low level.

535
00:25:47,640 --> 00:25:50,199
Speaker 2: Yeah, And if anything, everyone's buying calls to play the

536
00:25:50,280 --> 00:25:54,440
Speaker 2: upside or selling calls, not necessarily hedging their bets when

537
00:25:54,440 --> 00:25:55,600
Speaker 2: it comes to puts.

538
00:25:58,160 --> 00:26:01,520
Speaker 1: You're listening to The Bloomberg and Tell Legion's podcast, Catch

539
00:26:01,600 --> 00:26:04,520
Speaker 1: us live weekdays at ten am Eastern on Apple car

540
00:26:04,640 --> 00:26:07,639
Speaker 1: Play and Android Otto with the Bloomberg Business App. You

541
00:26:07,640 --> 00:26:10,920
Speaker 1: can also listen live on Amazon Alexa from our flagship

542
00:26:10,960 --> 00:26:16,600
Speaker 1: New York station, Just say Alexa play Bloomberg eleven thirty.

543
00:26:16,680 --> 00:26:19,959
Speaker 2: I think they do have share marks. Shakes still at McDonald's.

544
00:26:19,960 --> 00:26:21,920
Speaker 2: I'm not gonna you know, don't don't quote me on that.

545
00:26:22,359 --> 00:26:24,960
Speaker 8: Tucker, but I must get well at least, you know,

546
00:26:25,640 --> 00:26:28,040
Speaker 8: for Saint Patrick's Day's the seventeenth.

547
00:26:28,240 --> 00:26:30,160
Speaker 2: Yeah, I mean I feel like that's that's okay. I mean,

548
00:26:30,200 --> 00:26:31,639
Speaker 2: do you want to know the calorie count for that or

549
00:26:31,680 --> 00:26:32,040
Speaker 2: you're good.

550
00:26:32,640 --> 00:26:35,960
Speaker 8: I actually did check the calorie count for the large.

551
00:26:36,040 --> 00:26:42,080
Speaker 8: It's eight hundred cowaries. You imach, that's something one drink.

552
00:26:42,320 --> 00:26:44,800
Speaker 4: That is a something breakfast and lunch right there.

553
00:26:44,840 --> 00:26:48,800
Speaker 8: Combine that with a big mac large fries just set

554
00:26:48,880 --> 00:26:49,439
Speaker 8: for a week.

555
00:26:49,640 --> 00:26:50,120
Speaker 6: Yeah.

556
00:26:50,240 --> 00:26:52,199
Speaker 2: Oh, they can have reduced fat ice cream though, so

557
00:26:52,240 --> 00:26:54,159
Speaker 2: that's something. But that's only if you can order it

558
00:26:54,200 --> 00:26:58,840
Speaker 2: because apparently there was an outage. They experience a system outage.

559
00:26:59,119 --> 00:27:01,160
Speaker 2: It appears to have or did in the Asia Pacific

560
00:27:01,200 --> 00:27:05,040
Speaker 2: region and spread to other markets globally, leaving customers unable

561
00:27:05,080 --> 00:27:07,960
Speaker 2: to order at its stores. It's huge, so we have

562
00:27:07,960 --> 00:27:09,200
Speaker 2: to get more on this on the stock you just

563
00:27:09,240 --> 00:27:11,359
Speaker 2: down by about a four tens one percent. Michael Halem,

564
00:27:11,359 --> 00:27:15,520
Speaker 2: Bloomberg Intelligence Senior restaurant and food service analyst joins us, Now,

565
00:27:15,800 --> 00:27:16,560
Speaker 2: what happened here?

566
00:27:17,200 --> 00:27:18,480
Speaker 3: Nice segue by the way.

567
00:27:18,400 --> 00:27:20,720
Speaker 2: Thank you, you know, I mean, I do this for

568
00:27:20,760 --> 00:27:22,480
Speaker 2: a living, but you know it's a hit or miss

569
00:27:22,480 --> 00:27:22,679
Speaker 2: for me.

570
00:27:22,720 --> 00:27:23,560
Speaker 6: It's fifty to fifty.

571
00:27:23,960 --> 00:27:25,840
Speaker 9: Can't all be winners, I guess, but that was a

572
00:27:25,880 --> 00:27:30,200
Speaker 9: good one. Yeah, So I'm not really sure how many

573
00:27:30,720 --> 00:27:33,720
Speaker 9: stores in how many countries were affected so far from

574
00:27:33,760 --> 00:27:35,960
Speaker 9: what I could cobble together, it look like a couple

575
00:27:36,040 --> 00:27:38,760
Speaker 9: dozen countries, and it wasn't. All of the stores in

576
00:27:38,840 --> 00:27:42,680
Speaker 9: the countries had this digital outage, so people couldn't order

577
00:27:42,720 --> 00:27:45,719
Speaker 9: and pay with their mobile apps, right, and they had

578
00:27:45,720 --> 00:27:47,240
Speaker 9: trouble ordering ahead on.

579
00:27:47,960 --> 00:27:49,280
Speaker 2: I mean, I can make fun of it, but that

580
00:27:49,359 --> 00:27:50,720
Speaker 2: happened to Starbucks, like freak out.

581
00:27:51,240 --> 00:27:53,800
Speaker 9: So you know it's fair because you're addicted to the

582
00:27:53,840 --> 00:27:56,919
Speaker 9: caffeine and Starbucks, you're not addicted to the Big Mac.

583
00:27:56,840 --> 00:27:58,560
Speaker 4: Right, Well, think of the people who are addicted to

584
00:27:58,600 --> 00:28:01,000
Speaker 4: the Big macau exactly be hurt.

585
00:28:01,080 --> 00:28:02,840
Speaker 2: Yeah, think of the people who want that eight hundred

586
00:28:02,880 --> 00:28:06,639
Speaker 2: dollars dollars eight hundred calorie share mark shake would be

587
00:28:06,680 --> 00:28:09,800
Speaker 2: a really expensive shake if that was the case. How

588
00:28:09,880 --> 00:28:11,399
Speaker 2: is McDonald's doing so?

589
00:28:12,040 --> 00:28:13,919
Speaker 9: Yeah, So what I guess what I was getting at

590
00:28:13,960 --> 00:28:16,040
Speaker 9: is it's going to be negligible that the impact on

591
00:28:16,080 --> 00:28:18,200
Speaker 9: their earnings, you know, basis you know, it'll be we're

592
00:28:18,200 --> 00:28:20,280
Speaker 9: talking about like a few basis points maybe impact to

593
00:28:20,320 --> 00:28:23,520
Speaker 9: the global same star sales for the quarter. But McDonald's

594
00:28:23,600 --> 00:28:27,439
Speaker 9: is doing really well overall. Last quarter, they started to

595
00:28:27,680 --> 00:28:30,360
Speaker 9: talk a little bit more about the low income consumer

596
00:28:30,400 --> 00:28:32,320
Speaker 9: and how they're kind of pulling back on their spending,

597
00:28:32,680 --> 00:28:36,439
Speaker 9: visiting less often, ordering more off of the dollar menu

598
00:28:36,720 --> 00:28:40,760
Speaker 9: and things of that nature. But overall the company is

599
00:28:40,840 --> 00:28:43,960
Speaker 9: doing really well. They are they are having some issues

600
00:28:45,040 --> 00:28:46,440
Speaker 9: in the Middle East, however.

601
00:28:46,600 --> 00:28:48,120
Speaker 4: Yeah, can you talk us through that. It looks like

602
00:28:48,160 --> 00:28:50,680
Speaker 4: the CFO and now it's something At a recent conference.

603
00:28:50,880 --> 00:28:55,360
Speaker 9: Yeah, and they mentioned that same Star sales in the

604
00:28:56,120 --> 00:28:59,480
Speaker 9: for their international and developed markets are going to be

605
00:28:59,520 --> 00:29:02,240
Speaker 9: lower than expected, lower than consensus, lower than they were

606
00:29:02,360 --> 00:29:04,840
Speaker 9: last quarter. And so I think most of the street

607
00:29:05,000 --> 00:29:09,280
Speaker 9: had thought that initial impact of you know, some of

608
00:29:09,280 --> 00:29:12,000
Speaker 9: the things that happened with their franchise and perceived support

609
00:29:12,120 --> 00:29:16,240
Speaker 9: of Israel over Hamas hurt sales in the region, and

610
00:29:16,360 --> 00:29:18,200
Speaker 9: I think a lot of investors thought that would kind

611
00:29:18,200 --> 00:29:20,680
Speaker 9: of roll off after fourth quarter. But it looks like

612
00:29:20,720 --> 00:29:24,560
Speaker 9: it's going to impact their results for longer than expected.

613
00:29:24,680 --> 00:29:28,040
Speaker 9: I mean, it could last throughout the year. McDonald's does

614
00:29:28,080 --> 00:29:32,280
Speaker 9: have exposure to Egypt and Jordan too, countries that are

615
00:29:32,320 --> 00:29:36,320
Speaker 9: geographically very close to the conflict, so that's going to

616
00:29:36,400 --> 00:29:40,440
Speaker 9: impact their results as well, you know, and it could

617
00:29:40,480 --> 00:29:44,560
Speaker 9: be a few quarters for this for this you know,

618
00:29:44,680 --> 00:29:47,600
Speaker 9: impact to kind of to roll off. What I'm hearing

619
00:29:47,680 --> 00:29:50,800
Speaker 9: is it is improving. Things are improving not only with

620
00:29:50,920 --> 00:29:55,480
Speaker 9: the American chains but also locally, but it's going to

621
00:29:55,520 --> 00:29:55,880
Speaker 9: take time.

622
00:29:56,080 --> 00:29:59,360
Speaker 2: So I'm looking at the stock just this week, in

623
00:29:59,360 --> 00:30:01,320
Speaker 2: the last two day is down by about five percent.

624
00:30:01,360 --> 00:30:03,440
Speaker 2: Do you feel like that's accurately reflected now on the

625
00:30:03,480 --> 00:30:05,440
Speaker 2: stock price and valuation or is there just a little

626
00:30:05,440 --> 00:30:07,600
Speaker 2: bit more downside? Is that ego or is it actual

627
00:30:08,800 --> 00:30:10,880
Speaker 2: Middle East issues? Or he's kind of laughing at me, and.

628
00:30:10,880 --> 00:30:11,120
Speaker 5: I don't know.

629
00:30:11,160 --> 00:30:14,720
Speaker 9: Well, I've worked for Bloomberg Intelligence. Am I allowed to

630
00:30:14,760 --> 00:30:17,680
Speaker 9: tell you what's priced in, what's what's not priced in?

631
00:30:18,160 --> 00:30:21,680
Speaker 9: I mean, listen on the on the valuation, it's interesting.

632
00:30:21,720 --> 00:30:24,280
Speaker 9: We're in an interesting spot for restaurants right now. So

633
00:30:25,480 --> 00:30:26,640
Speaker 9: the stocks have done.

634
00:30:26,440 --> 00:30:27,400
Speaker 6: Really well.

635
00:30:28,600 --> 00:30:30,880
Speaker 9: Over the last like six months or so. I think

636
00:30:30,960 --> 00:30:34,360
Speaker 9: we've we've passed the toughest year over year comparisons in

637
00:30:34,480 --> 00:30:37,280
Speaker 9: January and February, so the year over year compares are

638
00:30:37,280 --> 00:30:40,560
Speaker 9: getting easier throughout the rest of the year. On one hand,

639
00:30:40,560 --> 00:30:42,760
Speaker 9: but on the other hand, you have a weakening consumer,

640
00:30:42,840 --> 00:30:46,080
Speaker 9: especially the low end, middle income consumer, right and so

641
00:30:47,720 --> 00:30:49,560
Speaker 9: it's tough to say. I mean, you can make the

642
00:30:49,680 --> 00:30:53,400
Speaker 9: argument the entire space is overvalued, right, so maybe that

643
00:30:53,520 --> 00:30:59,720
Speaker 9: five percent correction, maybe that's not enough. It's very difficult

644
00:30:59,720 --> 00:31:02,760
Speaker 9: to say. Like I said, we're a point now where

645
00:31:03,200 --> 00:31:06,400
Speaker 9: where it's going to be really really interesting. And I

646
00:31:06,400 --> 00:31:08,040
Speaker 9: think what's gonna happen is we're going to see a

647
00:31:08,080 --> 00:31:10,760
Speaker 9: bigger divergence between the winners and the losers. You know,

648
00:31:10,840 --> 00:31:15,959
Speaker 9: companies that are doing really well, companies like Chipotle, McDonald's

649
00:31:15,960 --> 00:31:17,520
Speaker 9: that have been able to draw in some of the

650
00:31:17,600 --> 00:31:20,520
Speaker 9: higher income consumers, I think are going to continue to

651
00:31:20,560 --> 00:31:23,080
Speaker 9: outperform some of these other chains that haven't been able

652
00:31:23,120 --> 00:31:25,320
Speaker 9: to do that to the same extent, like a Wendy's

653
00:31:25,400 --> 00:31:30,480
Speaker 9: or a cracker Barrel. So it feels like it's getting

654
00:31:30,520 --> 00:31:34,320
Speaker 9: back to a stock pickers markets market for restaurant stocks,

655
00:31:34,320 --> 00:31:39,360
Speaker 9: which is great, which I love, you know, so we'll

656
00:31:39,400 --> 00:31:41,920
Speaker 9: see it is a it is a business where you

657
00:31:41,960 --> 00:31:45,520
Speaker 9: have to compare I think, uh, you know these restaurant

658
00:31:45,600 --> 00:31:48,760
Speaker 9: chains where they were versus their peers, and McDonald's gets

659
00:31:48,760 --> 00:31:51,120
Speaker 9: a premium valuation, but it also has outperformed.

660
00:31:51,600 --> 00:31:51,760
Speaker 2: You know.

661
00:31:51,800 --> 00:31:53,400
Speaker 4: I would love to go back to this point you're

662
00:31:53,440 --> 00:31:56,480
Speaker 4: making about like consumer spending and getting which chains are

663
00:31:56,480 --> 00:31:58,760
Speaker 4: getting the wealthier customers. I mean, because we definitely saw

664
00:31:58,760 --> 00:32:02,040
Speaker 4: a trend of casual dining moving to fast casual, fast

665
00:32:02,040 --> 00:32:04,640
Speaker 4: casual moving to quick service, and so where are we

666
00:32:04,680 --> 00:32:07,600
Speaker 4: now on that is with inflation pressures easing, is that

667
00:32:07,720 --> 00:32:09,040
Speaker 4: kind of unlocking a little bit.

668
00:32:09,520 --> 00:32:14,800
Speaker 9: We're still seeing this case shaped recovery. We're seeing you

669
00:32:14,840 --> 00:32:18,280
Speaker 9: know that that's what we're seeing. So we're seeing the

670
00:32:18,320 --> 00:32:21,880
Speaker 9: high end consumers. We think they're going to start spending

671
00:32:21,880 --> 00:32:27,000
Speaker 9: again this year. Full service, I'm sorry, fine dining, they've

672
00:32:27,040 --> 00:32:30,280
Speaker 9: had they had the toughest comparisons. Last year, Fine dining

673
00:32:30,320 --> 00:32:34,400
Speaker 9: did absolutely terrible. People visited less and they spent less.

674
00:32:34,360 --> 00:32:37,959
Speaker 9: They've bought less expensive wine, things of that nature. Now,

675
00:32:38,000 --> 00:32:40,479
Speaker 9: with asset prices going up, we think that high end

676
00:32:40,520 --> 00:32:43,120
Speaker 9: consumer is going to come back and spend a lot more.

677
00:32:43,160 --> 00:32:44,680
Speaker 9: So we're going to see I think we're going to

678
00:32:44,720 --> 00:32:48,560
Speaker 9: see fine dining recover and probably outperform a lot of

679
00:32:48,560 --> 00:32:51,240
Speaker 9: the other sub segments of the restaurant industry. And I

680
00:32:51,280 --> 00:32:53,800
Speaker 9: think casual dining is probably going to get pinched the hardest.

681
00:32:54,840 --> 00:32:58,560
Speaker 9: You know, it's a similar lower and middle income consumer

682
00:32:58,680 --> 00:33:02,800
Speaker 9: to fast food, but fast food is cheaper and fast

683
00:33:02,800 --> 00:33:05,000
Speaker 9: casual is cheaper, so I think people are are going

684
00:33:05,040 --> 00:33:06,920
Speaker 9: to go and spend their money where they think they

685
00:33:06,920 --> 00:33:10,440
Speaker 9: get better value for that dollar, right, And and casual dining,

686
00:33:10,840 --> 00:33:13,520
Speaker 9: you know that full service, full service experience, you're going

687
00:33:13,560 --> 00:33:16,400
Speaker 9: to pay a tip. You're more likely to buy drinks, aaptizers, desserts,

688
00:33:16,600 --> 00:33:18,479
Speaker 9: So the bill ends up being a lot higher than

689
00:33:18,480 --> 00:33:19,480
Speaker 9: it would at the fasts.

690
00:33:19,840 --> 00:33:22,200
Speaker 2: Like fine dining now forget it, Like regular dining is

691
00:33:22,240 --> 00:33:26,040
Speaker 2: now fine dining, right, Like three hundred dollars for three people?

692
00:33:26,320 --> 00:33:30,640
Speaker 8: Can I point out an achilles heel? I think from

693
00:33:30,640 --> 00:33:34,840
Speaker 8: the suburban perspective for McDonald's, the drive in where everybody goes.

694
00:33:34,880 --> 00:33:36,760
Speaker 8: You don't go into the you go through your car.

695
00:33:36,920 --> 00:33:39,120
Speaker 8: I go on my mailbox in my car to get

696
00:33:39,160 --> 00:33:44,560
Speaker 8: the mail. That's a disaster. You pull up, you order,

697
00:33:44,760 --> 00:33:46,880
Speaker 8: you pay, and then you go to pick up your food,

698
00:33:47,280 --> 00:33:50,640
Speaker 8: and consistently they tell you have to go park and

699
00:33:50,680 --> 00:33:52,800
Speaker 8: someone will bring your food out to you later. That's

700
00:33:52,840 --> 00:33:56,080
Speaker 8: not fast food, and it's annoying because it's too much.

701
00:33:56,080 --> 00:33:56,640
Speaker 2: They can't do it.

702
00:33:56,920 --> 00:34:00,280
Speaker 8: Maybe I'm a staffed understand that's in the restaurant A

703
00:34:00,440 --> 00:34:03,560
Speaker 8: lot of the restaurants, so that that's such a pet peeve.

704
00:34:04,000 --> 00:34:06,120
Speaker 8: Every time I go, and I haven't been a long time,

705
00:34:06,200 --> 00:34:09,719
Speaker 8: I say to myself, I'm never going back to McDonald's.

706
00:34:09,719 --> 00:34:11,759
Speaker 9: And that's why they're pushing you to order ahead. They

707
00:34:11,760 --> 00:34:13,560
Speaker 9: want you to order ahead, and they have the geo

708
00:34:13,640 --> 00:34:15,719
Speaker 9: fencing so you can order ahead on your mobil ap.

709
00:34:15,920 --> 00:34:18,520
Speaker 9: Once you pull on the lot, they're alerted that you're

710
00:34:18,560 --> 00:34:21,120
Speaker 9: on premises. You park in the spot, you hang out,

711
00:34:21,120 --> 00:34:23,480
Speaker 9: you look at your phone, look at Instagram for a

712
00:34:23,560 --> 00:34:25,279
Speaker 9: couple of minutes, and then they bring out your food.

713
00:34:25,360 --> 00:34:27,319
Speaker 2: Yeah, it's totally described what Tucker does.

714
00:34:27,360 --> 00:34:28,920
Speaker 6: For sure that instagramming is like.

715
00:34:28,920 --> 00:34:29,560
Speaker 2: A few minutes.

716
00:34:30,680 --> 00:34:31,160
Speaker 6: Let you go though.

717
00:34:31,200 --> 00:34:33,719
Speaker 2: But then to that point, what are their margins like?

718
00:34:33,800 --> 00:34:36,160
Speaker 2: Because input costs and inflationary costs and then you have

719
00:34:36,239 --> 00:34:39,200
Speaker 2: labor costs, and I'm wondering they can't really pass it on.

720
00:34:39,239 --> 00:34:40,319
Speaker 2: What are their margins looking like?

721
00:34:40,360 --> 00:34:42,920
Speaker 9: Well, the franchises are getting squeezed, There's no doubt about it.

722
00:34:42,960 --> 00:34:44,920
Speaker 9: I mean, the beauty of being a franchise or like

723
00:34:45,000 --> 00:34:48,680
Speaker 9: McDonald's is their margins are fantastic because you know, they're

724
00:34:48,760 --> 00:34:53,560
Speaker 9: really a marketing company, right Like they're helping their franchisees market,

725
00:34:54,000 --> 00:34:57,480
Speaker 9: you know, market the brand and the food so yeah,

726
00:34:57,560 --> 00:35:01,799
Speaker 9: but franchises are getting squeezed, there's no about it. This year,

727
00:35:02,160 --> 00:35:05,719
Speaker 9: commodity prices are going to be commodity price increases are

728
00:35:05,760 --> 00:35:09,760
Speaker 9: going to be less than what we've seen. But chains

729
00:35:09,800 --> 00:35:14,279
Speaker 9: are very, very wary about raising prices anymore because you've

730
00:35:14,280 --> 00:35:17,720
Speaker 9: seen traffic decline a lot over the last three years,

731
00:35:17,760 --> 00:35:20,520
Speaker 9: and it's been in response to much much higher prices.

732
00:35:20,960 --> 00:35:23,240
Speaker 2: Michael, great stuff, really great to have you, super interesting

733
00:35:23,239 --> 00:35:26,720
Speaker 2: conversation Michael Hale and Bloomberg Intelligence senior restaurant and food

734
00:35:26,880 --> 00:35:29,120
Speaker 2: service analysts. But then you would think Jen that, like

735
00:35:29,680 --> 00:35:31,520
Speaker 2: the people who don't want to go out to eat

736
00:35:31,520 --> 00:35:34,000
Speaker 2: anymore or don't want to go to casual like, do

737
00:35:34,080 --> 00:35:36,320
Speaker 2: they then trade down? And is there a new customer

738
00:35:36,360 --> 00:35:38,040
Speaker 2: that's going to be coming in on a more consistent

739
00:35:38,080 --> 00:35:39,200
Speaker 2: basis as things get harder.

740
00:35:39,239 --> 00:35:39,600
Speaker 3: I don't know.

741
00:35:39,800 --> 00:35:40,279
Speaker 6: I don't know.

742
00:35:40,320 --> 00:35:42,279
Speaker 4: And the thing is, I do always wonder about the

743
00:35:42,320 --> 00:35:46,080
Speaker 4: low income consumer because if that spending starts tailing off,

744
00:35:46,160 --> 00:35:48,000
Speaker 4: what does that say about consumer spending for the rest

745
00:35:48,040 --> 00:35:50,360
Speaker 4: of the economy. I'm good seventy percent of the economy.

746
00:35:50,440 --> 00:35:52,359
Speaker 2: There's a really great article on the Bloomberg that talks

747
00:35:52,400 --> 00:35:55,600
Speaker 2: about how auto debt, for example, and credit card debt

748
00:35:55,640 --> 00:35:58,080
Speaker 2: has really been rising, and that people might be getting

749
00:35:58,080 --> 00:36:00,839
Speaker 2: paid more, but it's the debt part. It is really

750
00:36:00,880 --> 00:36:03,040
Speaker 2: squeezing everyone. I encourage everyone to read it. It was

751
00:36:03,360 --> 00:36:04,279
Speaker 2: really eye opening to me.

752
00:36:04,880 --> 00:36:09,400
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753
00:36:09,600 --> 00:36:13,240
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754
00:36:13,400 --> 00:36:16,360
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755
00:36:16,480 --> 00:36:19,920
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756
00:36:19,920 --> 00:36:23,120
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757
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