1
00:00:02,480 --> 00:00:09,160
Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the

2
00:00:09,200 --> 00:00:13,360
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

3
00:00:13,400 --> 00:00:16,360
Speaker 1: Eastern on Apple Car playing Android Auto with the Bloomberg

4
00:00:16,440 --> 00:00:19,759
Speaker 1: Business App. Listen on demand wherever you get your podcasts,

5
00:00:19,960 --> 00:00:22,360
Speaker 1: or watch us live on YouTube.

6
00:00:23,600 --> 00:00:23,840
Speaker 2: Again.

7
00:00:23,880 --> 00:00:26,040
Speaker 3: We've been calling out crude oil Brent crude oil up

8
00:00:26,040 --> 00:00:29,200
Speaker 3: three point nine percent today, seventy six dollars seventy seven cents,

9
00:00:29,240 --> 00:00:31,400
Speaker 3: big big move hire over the last several days to

10
00:00:31,520 --> 00:00:34,360
Speaker 3: the Mid East tensions. Here Daboca Krishna Kumar Joints, so

11
00:00:34,400 --> 00:00:38,000
Speaker 3: she's a Bloomberg Oil Markets reporter. Debica, thanks so much

12
00:00:38,040 --> 00:00:41,040
Speaker 3: for joining us. What's the latest that's moving markets today?

13
00:00:42,560 --> 00:00:46,000
Speaker 4: Hi, thanks for having me today. The big question now

14
00:00:46,120 --> 00:00:51,200
Speaker 4: is whether Israel's retort to Israel to Ron's missile strikes

15
00:00:51,200 --> 00:00:55,360
Speaker 4: will involve oil targets or not. We just had moments

16
00:00:55,360 --> 00:01:01,680
Speaker 4: ago comments from President Biden saying that that's currently being discussed.

17
00:01:01,840 --> 00:01:01,960
Speaker 5: Now.

18
00:01:02,000 --> 00:01:06,920
Speaker 4: The market's obviously on edge because oil infrastructure is critical

19
00:01:07,880 --> 00:01:11,080
Speaker 4: when it comes to determining supply and demand going forward.

20
00:01:11,760 --> 00:01:15,440
Speaker 4: Iran produces over three million barrels a day, so any

21
00:01:15,600 --> 00:01:21,119
Speaker 4: attack on their main export facilities or energy infrastructure could

22
00:01:21,120 --> 00:01:24,040
Speaker 4: have significant ripple effects across the market, which is why

23
00:01:24,040 --> 00:01:26,840
Speaker 4: we're seeing now prices rise for a third straight day,

24
00:01:26,920 --> 00:01:29,120
Speaker 4: because markets are very much on edge about how this

25
00:01:29,200 --> 00:01:29,920
Speaker 4: is going to play out.

26
00:01:30,160 --> 00:01:32,119
Speaker 6: And just looking at your reporting, you side a City

27
00:01:32,160 --> 00:01:35,280
Speaker 6: Group analyst saying that a major strike could take one

28
00:01:35,319 --> 00:01:37,959
Speaker 6: and a half million barrels of daily supply off the market,

29
00:01:38,160 --> 00:01:41,640
Speaker 6: whereas a minor infrastructure strike on downstream assets would be

30
00:01:41,680 --> 00:01:44,160
Speaker 6: closer to three hundred thousand to four hundred and fifty

31
00:01:44,200 --> 00:01:47,080
Speaker 6: thousand barrels a day of output. He just put that

32
00:01:47,120 --> 00:01:50,680
Speaker 6: into context and what that means for the energy space

33
00:01:50,680 --> 00:01:51,400
Speaker 6: and for oil.

34
00:01:52,560 --> 00:01:55,920
Speaker 4: Yeah, yeah, of course, we are actually in an interesting

35
00:01:55,960 --> 00:01:59,160
Speaker 4: market right now because some people like to call it

36
00:01:59,480 --> 00:02:03,280
Speaker 4: an artificial prop up because OPEC members and allies are

37
00:02:03,320 --> 00:02:06,840
Speaker 4: basically curtailing production. They were supposed to return supplies to

38
00:02:06,880 --> 00:02:09,520
Speaker 4: the market in October, but they took a look at

39
00:02:09,520 --> 00:02:12,600
Speaker 4: the market and how demand was looking kind of shaky

40
00:02:12,639 --> 00:02:16,280
Speaker 4: because of questions about economic growth in the US and China,

41
00:02:16,600 --> 00:02:19,200
Speaker 4: the two biggest economies in the world, and they thought, well,

42
00:02:19,240 --> 00:02:21,880
Speaker 4: maybe we should pause and maybe we should kind of

43
00:02:22,040 --> 00:02:25,400
Speaker 4: rethink returning supplies to the market. So now the current

44
00:02:25,440 --> 00:02:27,720
Speaker 4: plan is to return supplies to the market in December.

45
00:02:28,560 --> 00:02:31,000
Speaker 4: So in the market looks at this broadly, the reason

46
00:02:31,000 --> 00:02:34,000
Speaker 4: we're not actually seeing more talk about one hundred dollars

47
00:02:34,040 --> 00:02:38,080
Speaker 4: oil or an insane spike in prices is because the

48
00:02:38,160 --> 00:02:42,280
Speaker 4: market is where that OPEC members like Saudi Arabia, UAE

49
00:02:42,520 --> 00:02:46,000
Speaker 4: other Middle Eastern producers could quickly bring on supplies should

50
00:02:46,040 --> 00:02:50,600
Speaker 4: we face a major shortage. And obviously there's also the

51
00:02:50,639 --> 00:02:53,000
Speaker 4: sense that you know, we need we need to understand

52
00:02:53,000 --> 00:02:55,839
Speaker 4: how demand's going to play out. There's still worries about

53
00:02:55,880 --> 00:02:59,280
Speaker 4: the economy, both in the US and China, and bear

54
00:02:59,320 --> 00:03:01,800
Speaker 4: in mind China is actually a big buyer of Iranian

55
00:03:02,040 --> 00:03:06,760
Speaker 4: CREWD so even if we had, even if this doesn't

56
00:03:06,760 --> 00:03:12,480
Speaker 4: descend into further missile strikes an all out war, we

57
00:03:12,600 --> 00:03:17,520
Speaker 4: might see more tighter economic sanctions, and that's kind of

58
00:03:18,000 --> 00:03:20,120
Speaker 4: interesting to see. It'll be interesting to see how that

59
00:03:20,160 --> 00:03:24,280
Speaker 4: plays out as well, because it's you could only target

60
00:03:24,360 --> 00:03:28,079
Speaker 4: financial components of that trade, and that may not necessarily

61
00:03:28,200 --> 00:03:32,040
Speaker 4: result in loss of supply. So in the broad context

62
00:03:32,040 --> 00:03:35,120
Speaker 4: of things, there are several moving parts here, and the

63
00:03:35,160 --> 00:03:39,040
Speaker 4: market really needs to understand how each component is going

64
00:03:39,080 --> 00:03:42,600
Speaker 4: to play out. And it's happening in real time, which

65
00:03:42,600 --> 00:03:44,600
Speaker 4: is why we're seeing the volatility and prices.

66
00:03:45,040 --> 00:03:47,160
Speaker 3: Devika, thank you so much for your reporting. Really appreciate

67
00:03:47,200 --> 00:03:49,600
Speaker 3: getting a few minutes of your time. Devica Krishna Kumar.

68
00:03:50,200 --> 00:03:52,360
Speaker 3: She is part of the team that covers a global

69
00:03:52,480 --> 00:03:55,240
Speaker 3: crude oil for Bloomberg News and they have a good

70
00:03:55,440 --> 00:03:57,160
Speaker 3: reporting out this morning. To check it out on the

71
00:03:57,160 --> 00:04:00,559
Speaker 3: Bloomberg Terminal and on Bloomberg dot Com.

72
00:04:01,600 --> 00:04:05,480
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

73
00:04:05,560 --> 00:04:09,080
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

74
00:04:09,120 --> 00:04:11,880
Speaker 1: Auto with the Bloomberg Business app. You can also listen

75
00:04:12,000 --> 00:04:15,120
Speaker 1: live on Amazon Alexa from our flagship New York station.

76
00:04:15,480 --> 00:04:18,239
Speaker 1: Just say Alexa play Bloomberg eleven thirty.

77
00:04:19,640 --> 00:04:20,200
Speaker 7: I'm Paul Swing.

78
00:04:20,240 --> 00:04:22,280
Speaker 3: You're live here on our Bloomberg Interactive Broker Studio or

79
00:04:22,279 --> 00:04:25,039
Speaker 3: streaming live on YouTube. To check us out there and

80
00:04:25,080 --> 00:04:27,080
Speaker 3: go Bloomberg Live Radio. That's what I did yesterday that

81
00:04:27,120 --> 00:04:28,880
Speaker 3: got me right to where I wanted to go. Networked

82
00:04:29,000 --> 00:04:29,599
Speaker 3: just just fine.

83
00:04:29,600 --> 00:04:32,680
Speaker 2: Here Bailer gets some ism data came out today. It

84
00:04:32,680 --> 00:04:34,680
Speaker 2: looks like better than expected. Here looks better than expected.

85
00:04:34,720 --> 00:04:37,799
Speaker 6: We see the SMP right now down call it two points,

86
00:04:37,839 --> 00:04:41,599
Speaker 6: but major averages pairing losses, if not gains.

87
00:04:41,800 --> 00:04:42,320
Speaker 2: Looking at the.

88
00:04:42,279 --> 00:04:45,920
Speaker 6: Two year right now at three spot seven percent, So

89
00:04:46,240 --> 00:04:47,480
Speaker 6: se markets move, all right.

90
00:04:47,440 --> 00:04:49,039
Speaker 2: Let's get the breakdown of the ISM data.

91
00:04:49,040 --> 00:04:51,520
Speaker 3: Steve Miller joins as he's the chairman for the Institute

92
00:04:51,560 --> 00:04:55,559
Speaker 3: for Supply Management, joining us via that zoom thing. So Steve,

93
00:04:55,600 --> 00:04:58,640
Speaker 3: seems like pretty good numbers. Again, fifty four point nine

94
00:04:58,680 --> 00:05:00,800
Speaker 3: was the headline number they consent. This was fifty one

95
00:05:00,800 --> 00:05:03,599
Speaker 3: point seven and last period was fIF fifty one point five.

96
00:05:03,680 --> 00:05:06,680
Speaker 2: Pretty solid, Yeah, very solid.

97
00:05:06,720 --> 00:05:10,480
Speaker 8: We saw over a six percent increase in both the

98
00:05:10,600 --> 00:05:13,960
Speaker 8: business activity and the new orders indexes, and that's really

99
00:05:14,000 --> 00:05:17,880
Speaker 8: what drove drove the change in the PMI this month.

100
00:05:18,200 --> 00:05:21,120
Speaker 6: And see when I'm looking at our Bloomberg headline expand

101
00:05:21,160 --> 00:05:25,320
Speaker 6: in September at the fastest pace since February twenty twenty three,

102
00:05:25,960 --> 00:05:28,120
Speaker 6: reading too much into that that it's a bullish indicator.

103
00:05:29,839 --> 00:05:32,280
Speaker 8: So I'd say it's a bullish indicator because what we

104
00:05:32,360 --> 00:05:35,800
Speaker 8: saw is an increase in kind of the broadening of

105
00:05:35,880 --> 00:05:39,640
Speaker 8: the expansionary activity, both in business activity as well as

106
00:05:39,720 --> 00:05:42,880
Speaker 8: new orders. But putting that in context, you know, we're

107
00:05:42,920 --> 00:05:46,040
Speaker 8: ending kind of a lackluster Q three. If you look

108
00:05:46,080 --> 00:05:49,760
Speaker 8: at the average PMI for this Q three, it's really

109
00:05:49,800 --> 00:05:53,520
Speaker 8: the lowest average since two thousand and nine. So although

110
00:05:53,520 --> 00:05:55,719
Speaker 8: we're seeing it was a great number for this month,

111
00:05:56,480 --> 00:05:59,160
Speaker 8: but you know, fingers crossed that with the port activity

112
00:05:59,200 --> 00:06:02,160
Speaker 8: and such, we'll be able to see that continued growth.

113
00:06:02,320 --> 00:06:04,320
Speaker 3: Where would you like to see that that headline number,

114
00:06:04,360 --> 00:06:06,800
Speaker 3: that fifty four point nine Again, it seems pretty good

115
00:06:06,920 --> 00:06:09,560
Speaker 3: relative to the last period and relative to consensus. Where

116
00:06:09,560 --> 00:06:10,440
Speaker 3: would you like to see that?

117
00:06:11,400 --> 00:06:14,880
Speaker 8: Yeah, absolutely so if we if we saw consistency fifty

118
00:06:14,920 --> 00:06:17,520
Speaker 8: three fifty five range, that would be really that'd be

119
00:06:17,600 --> 00:06:20,840
Speaker 8: really healthy improvement coming off of a couple of fifty

120
00:06:20,880 --> 00:06:25,520
Speaker 8: ones and then actually contraction before that. We're you know,

121
00:06:25,520 --> 00:06:27,719
Speaker 8: we're on the right trajectory. Hopefully we can hold it

122
00:06:27,839 --> 00:06:28,360
Speaker 8: all right, Very.

123
00:06:28,320 --> 00:06:30,000
Speaker 3: Good, Steve, Thanks so much for joining us for a

124
00:06:30,040 --> 00:06:32,839
Speaker 3: few minutes there, Steve Miller, chairman for the Institute for

125
00:06:33,040 --> 00:06:33,960
Speaker 3: Supply Management.

126
00:06:33,960 --> 00:06:38,680
Speaker 2: That's im to us. Cool kids there, Billy.

127
00:06:37,720 --> 00:06:41,560
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

128
00:06:41,680 --> 00:06:44,360
Speaker 1: weekdays at ten am Eastern on fo card Playing and

129
00:06:44,520 --> 00:06:47,400
Speaker 1: Broun Auto with the Bloomberg Business app. Listen on demand

130
00:06:47,440 --> 00:06:51,760
Speaker 1: wherever you get your podcasts or watch us live on YouTube.

131
00:06:52,960 --> 00:06:53,839
Speaker 2: Right now, let's go to market.

132
00:06:53,880 --> 00:06:58,159
Speaker 3: Betell, Senior portfolio Managered Offspring Global Investments. Margo, We're going

133
00:06:58,200 --> 00:07:00,640
Speaker 3: to get a big jobs print tomorrow, which will be

134
00:07:00,680 --> 00:07:02,280
Speaker 3: presumably pretty informative for.

135
00:07:02,240 --> 00:07:03,280
Speaker 2: This Federal Reserve.

136
00:07:03,880 --> 00:07:06,640
Speaker 3: How are you thinking about the markets these days given

137
00:07:06,680 --> 00:07:08,840
Speaker 3: all the economic data that we have had over the

138
00:07:08,880 --> 00:07:10,120
Speaker 3: past several weeks.

139
00:07:11,080 --> 00:07:13,680
Speaker 9: Well, I think it shows the economy is still growing.

140
00:07:13,760 --> 00:07:16,960
Speaker 9: We had a great GDP number, three percent, which is

141
00:07:17,080 --> 00:07:19,280
Speaker 9: better I think a lot of people thought, and I

142
00:07:19,280 --> 00:07:21,560
Speaker 9: think it says a where to continue to move along

143
00:07:21,680 --> 00:07:25,280
Speaker 9: at modest growth rates, probably less than three percent because

144
00:07:25,320 --> 00:07:29,000
Speaker 9: some of the numbers, especially for labors next so still positive,

145
00:07:29,040 --> 00:07:32,880
Speaker 9: no recession, no boomy upswing in GDP, so a little

146
00:07:32,880 --> 00:07:35,200
Speaker 9: more of the same and a little pressure probably on

147
00:07:35,600 --> 00:07:37,800
Speaker 9: revenues and profit margins going forward.

148
00:07:38,440 --> 00:07:41,160
Speaker 6: And Mary, now that we have the first FED cut

149
00:07:41,240 --> 00:07:43,679
Speaker 6: in the rear view mirror and at least the swaps

150
00:07:43,720 --> 00:07:47,200
Speaker 6: market pricing in a string through the first half of

151
00:07:47,320 --> 00:07:51,160
Speaker 6: next year, how are you positioning in this market, especially

152
00:07:51,200 --> 00:07:54,160
Speaker 6: given the expectation that the Fed can navigate us off landing.

153
00:07:55,880 --> 00:07:58,120
Speaker 9: Well, we think some things are out of control of

154
00:07:58,120 --> 00:08:00,400
Speaker 9: the FED, which is the economy. But I do think

155
00:08:00,440 --> 00:08:03,680
Speaker 9: that we'll see another two quarter point reductions in the

156
00:08:03,760 --> 00:08:06,520
Speaker 9: FED funds rate over the next few months, which would

157
00:08:06,560 --> 00:08:09,960
Speaker 9: be modestly helpful over the long return for the economy.

158
00:08:10,000 --> 00:08:12,600
Speaker 9: But basically we think that, as I said, the economy

159
00:08:12,680 --> 00:08:16,440
Speaker 9: is growing, it's a sustainable level, but more modest than

160
00:08:16,480 --> 00:08:18,360
Speaker 9: perhaps you might like to see. So we think that

161
00:08:18,480 --> 00:08:21,760
Speaker 9: says that return some equity will be maybe mid single

162
00:08:21,760 --> 00:08:24,400
Speaker 9: digit going forward, as opposed to the double digit types

163
00:08:24,400 --> 00:08:26,720
Speaker 9: of rates we've had so far. Is here, So no

164
00:08:26,840 --> 00:08:28,720
Speaker 9: changes in the portfolio or outlonger.

165
00:08:29,400 --> 00:08:31,840
Speaker 3: So Margan, I'm looking at then GO function of the

166
00:08:31,840 --> 00:08:34,520
Speaker 3: Bloomberg Index browser, and I see across the US fixed

167
00:08:34,520 --> 00:08:37,960
Speaker 3: income everything's in the green here, solid mid single digit

168
00:08:38,040 --> 00:08:41,640
Speaker 3: returns for fixed income investors share. The highlight, though, is

169
00:08:41,880 --> 00:08:44,160
Speaker 3: US corporate high yield. How do you think about that

170
00:08:44,200 --> 00:08:46,720
Speaker 3: the high yield market? Is there any value left there?

171
00:08:48,400 --> 00:08:51,120
Speaker 9: Well, yes, there is this modest value. But actually, ever

172
00:08:51,160 --> 00:08:53,880
Speaker 9: since the had began to raise short rates a couple

173
00:08:53,880 --> 00:08:56,480
Speaker 9: of years ago, the best performing part of the high

174
00:08:56,559 --> 00:08:59,839
Speaker 9: old market has been the fixed income market has been

175
00:09:00,160 --> 00:09:04,480
Speaker 9: yield because it just simply pushioned those treasury rate rises

176
00:09:04,600 --> 00:09:06,760
Speaker 9: with the extra yield do you get so right now

177
00:09:07,040 --> 00:09:09,240
Speaker 9: in double B bonds you get a little over two

178
00:09:09,320 --> 00:09:13,120
Speaker 9: hundred basis points two percentage points for single baes, say

179
00:09:13,160 --> 00:09:16,559
Speaker 9: three percentage points, But with a backdrop of the economy

180
00:09:16,600 --> 00:09:19,600
Speaker 9: growing and defaults looking like they're going to be under

181
00:09:19,640 --> 00:09:22,360
Speaker 9: two percent over the next year, that says you're still

182
00:09:22,360 --> 00:09:25,240
Speaker 9: getting a bargain for the risk you're taken by being

183
00:09:25,240 --> 00:09:27,520
Speaker 9: in below investment grade. So we think it's still attractive,

184
00:09:27,800 --> 00:09:31,600
Speaker 9: but modest. Certainly, we're not looking for double digit returns

185
00:09:31,600 --> 00:09:34,680
Speaker 9: going forward, mid single digits, just basically the coupon.

186
00:09:35,679 --> 00:09:38,080
Speaker 6: And so does that impact kind of your allocation to

187
00:09:38,400 --> 00:09:40,800
Speaker 6: risk of your debt or how are you thinking about that?

188
00:09:41,960 --> 00:09:45,680
Speaker 9: Well, with your spread so narrow and dollar prices pretty

189
00:09:45,720 --> 00:09:49,040
Speaker 9: high in the high yeld market, most bonds are trading

190
00:09:49,240 --> 00:09:51,720
Speaker 9: pretty close to their face value, maybe ninety eight ninety

191
00:09:51,720 --> 00:09:54,679
Speaker 9: cents on the dollar, we think that you pretty much

192
00:09:54,720 --> 00:09:57,600
Speaker 9: have gotten rid of the extra risk premium that was

193
00:09:57,600 --> 00:09:59,920
Speaker 9: in the high yeld market when the Fed had rates

194
00:10:00,120 --> 00:10:02,640
Speaker 9: or high. So we don't think there's a lot of

195
00:10:02,679 --> 00:10:06,040
Speaker 9: capital appreciation room. So really, if you're looking realistically in

196
00:10:06,160 --> 00:10:09,640
Speaker 9: return and say over the next year five six, maybe

197
00:10:09,679 --> 00:10:13,480
Speaker 9: seven percent. That says to me that the market really

198
00:10:13,600 --> 00:10:15,800
Speaker 9: is going to favor stocks where I think we should

199
00:10:15,840 --> 00:10:17,920
Speaker 9: at least get that much and maybe even a little

200
00:10:17,960 --> 00:10:20,040
Speaker 9: bit more if we have growth to stay around that

201
00:10:20,200 --> 00:10:26,319
Speaker 9: one two percent level. So basically, low volatility, modest coupon,

202
00:10:26,440 --> 00:10:28,800
Speaker 9: and modest return is how we see fixed income in

203
00:10:28,800 --> 00:10:30,080
Speaker 9: the high old market right now.

204
00:10:30,679 --> 00:10:32,640
Speaker 3: And Margie, I guess this month of September it was

205
00:10:32,679 --> 00:10:34,080
Speaker 3: a record month for new issuance.

206
00:10:34,320 --> 00:10:34,880
Speaker 4: What is that?

207
00:10:35,160 --> 00:10:36,479
Speaker 2: Is that good for the market.

208
00:10:37,840 --> 00:10:40,199
Speaker 9: Yes, it's excellent because the problem with the high old

209
00:10:40,320 --> 00:10:43,200
Speaker 9: market is there simply has not been enough supply for

210
00:10:43,320 --> 00:10:46,920
Speaker 9: all the demand by investors for that extra yield. In fact,

211
00:10:47,000 --> 00:10:49,480
Speaker 9: we actually had about a year ago or so the

212
00:10:49,480 --> 00:10:53,040
Speaker 9: market actually shrink because we had new issuance drop off,

213
00:10:53,080 --> 00:10:55,800
Speaker 9: we had maturities and bond calls, so the whole high

214
00:10:55,880 --> 00:10:59,079
Speaker 9: old market actually shrunk. So it would be very good

215
00:10:59,400 --> 00:11:01,679
Speaker 9: to have a big supply. There's a lot of demands

216
00:11:01,679 --> 00:11:03,960
Speaker 9: that will match that, and to have the high old

217
00:11:04,040 --> 00:11:06,880
Speaker 9: market grow a bit would add to the liquidity, give

218
00:11:07,040 --> 00:11:09,960
Speaker 9: investors more choices of names Dubai, So I think more

219
00:11:09,960 --> 00:11:14,000
Speaker 9: supply would be very positive. There's a saying supply creates

220
00:11:14,000 --> 00:11:16,560
Speaker 9: and some demand in the bottom market.

221
00:11:17,440 --> 00:11:19,400
Speaker 3: Yeah, very good at across all of fixed income. A

222
00:11:19,520 --> 00:11:22,800
Speaker 3: really really busy September four new issue. And so Margia Btel,

223
00:11:22,840 --> 00:11:24,360
Speaker 3: thanks so much for joining us market. Bettel is a

224
00:11:24,400 --> 00:11:27,480
Speaker 3: senior portfolio manager all Spring Global Investment. She's based up

225
00:11:27,480 --> 00:11:30,839
Speaker 3: there in Boston. Joining us via Zooming.

226
00:11:30,880 --> 00:11:34,760
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

227
00:11:34,840 --> 00:11:37,880
Speaker 1: weekdays at ten am Eastern on Apple card Play and

228
00:11:37,880 --> 00:11:40,800
Speaker 1: androyd Otto with the Bloomberg Business App. You can also

229
00:11:40,880 --> 00:11:44,360
Speaker 1: listen live on Amazon Alexa from our flagship New York station,

230
00:11:44,760 --> 00:11:48,480
Speaker 1: just say Alexa playing Bloomberg eleven thirty.

231
00:11:49,080 --> 00:11:51,440
Speaker 3: All right, that port strike. It is still ever day

232
00:11:51,520 --> 00:11:53,439
Speaker 3: three here, and it's starting to get serious here, and

233
00:11:53,520 --> 00:11:56,760
Speaker 3: you don't get a sense that there is, you know,

234
00:11:56,840 --> 00:11:59,080
Speaker 3: a lot of discussion going on here. So the questions

235
00:11:59,080 --> 00:12:01,160
Speaker 3: one is going to really start the impact this economy?

236
00:12:01,360 --> 00:12:03,559
Speaker 3: And to what degree? Dristic a critical joins is. She's

237
00:12:03,600 --> 00:12:06,360
Speaker 3: a chief scientist at Workplace Culture. The company is called

238
00:12:06,440 --> 00:12:12,640
Speaker 3: Culture Partners. Joining us via Sacramento via that Zoom thing. Jessica,

239
00:12:12,679 --> 00:12:15,480
Speaker 3: talk about this strike. How do you kind of envision

240
00:12:15,480 --> 00:12:18,120
Speaker 3: this strike from both sides perspective, what's what's going on.

241
00:12:18,120 --> 00:12:20,319
Speaker 2: Here and where could there be movement? Maybe?

242
00:12:22,240 --> 00:12:25,120
Speaker 5: Well, this strike comes down to ultimately two issues. It's

243
00:12:25,160 --> 00:12:29,000
Speaker 5: about wages and it's about automation. So Harold Daggett, who's

244
00:12:29,040 --> 00:12:32,360
Speaker 5: the president of the ISLA, has said, not only are

245
00:12:32,360 --> 00:12:36,120
Speaker 5: they wanting seventy seven percent increase, which is significant, they've

246
00:12:36,160 --> 00:12:39,040
Speaker 5: already been offered fifty percent. They're going to seventy seven,

247
00:12:39,640 --> 00:12:43,440
Speaker 5: but they also want to create air tight language quote unquote,

248
00:12:43,480 --> 00:12:46,480
Speaker 5: air tight language that removes the ability for the ports

249
00:12:46,480 --> 00:12:50,960
Speaker 5: to use automation or semi automation. And it's downright archaic

250
00:12:51,120 --> 00:12:53,600
Speaker 5: what they're asking for. If you want to understand what

251
00:12:53,679 --> 00:12:57,400
Speaker 5: kind of automation they're saying they refuse to allow. It's

252
00:12:57,440 --> 00:13:01,920
Speaker 5: not some complicated, new fancy AI technology. We're just talking

253
00:13:02,000 --> 00:13:04,680
Speaker 5: parking gates going up and down. They're not okay with

254
00:13:04,720 --> 00:13:07,839
Speaker 5: that kind of automation. They're not okay with time card

255
00:13:07,920 --> 00:13:11,120
Speaker 5: stamping automation. In fact, right now they have people who

256
00:13:11,160 --> 00:13:13,760
Speaker 5: are employed as schedulers to write down who is there,

257
00:13:13,840 --> 00:13:16,000
Speaker 5: when they arrived and when they left, which allows for

258
00:13:16,080 --> 00:13:20,200
Speaker 5: inaccuracy and time reporting. So they're really holding the port

259
00:13:20,880 --> 00:13:23,920
Speaker 5: hostage with these demands, and that is why we're at

260
00:13:23,960 --> 00:13:25,680
Speaker 5: a standstill. I think we could easily get there at

261
00:13:25,679 --> 00:13:27,480
Speaker 5: the wages. The ports are doing very well. They have

262
00:13:27,559 --> 00:13:30,640
Speaker 5: the financial capacity to meet the needs of seventy seven percent.

263
00:13:30,840 --> 00:13:33,120
Speaker 5: But it's really the automation that is the sticking point.

264
00:13:33,880 --> 00:13:36,760
Speaker 6: Is that just a fear of automation becoming a slippery

265
00:13:36,800 --> 00:13:38,679
Speaker 6: slope from your understanding.

266
00:13:39,920 --> 00:13:42,440
Speaker 5: I don't think it's a fear. I think it's a strategy.

267
00:13:42,640 --> 00:13:46,520
Speaker 5: They have said, quote, I will cripple you are words

268
00:13:46,559 --> 00:13:49,480
Speaker 5: that have come from the president of the union's mouth.

269
00:13:49,720 --> 00:13:53,320
Speaker 5: He is intentionally trying to cripple the American economy in

270
00:13:53,360 --> 00:13:55,440
Speaker 5: an effort to get what they want and to maintain

271
00:13:55,480 --> 00:13:59,000
Speaker 5: the job security. And it is downright an American. I mean,

272
00:13:59,040 --> 00:14:02,200
Speaker 5: I believe that we all, every industry has the ability

273
00:14:02,240 --> 00:14:07,280
Speaker 5: to implement basic technology, basic automations in order to advance

274
00:14:07,440 --> 00:14:10,400
Speaker 5: and progress as a society. And what's interesting here is

275
00:14:10,400 --> 00:14:12,880
Speaker 5: if you look at what they're doing, they're actually making

276
00:14:12,920 --> 00:14:16,280
Speaker 5: the argument for why we need these ports to implement automation,

277
00:14:16,760 --> 00:14:19,760
Speaker 5: because if they were automated, we wouldn't be being held

278
00:14:19,800 --> 00:14:23,400
Speaker 5: hostage by this union and the effects of the economy

279
00:14:23,480 --> 00:14:26,280
Speaker 5: and the American consumer are going to be felt soon

280
00:14:26,640 --> 00:14:29,800
Speaker 5: and it is going to be widespread. There will be panic.

281
00:14:29,840 --> 00:14:32,240
Speaker 5: There already is panic. There's already been a run on

282
00:14:32,280 --> 00:14:35,720
Speaker 5: toilet paper and paper towels, which is completely unrelated to

283
00:14:35,760 --> 00:14:38,400
Speaker 5: the imports from these ports. So it's interesting that's really

284
00:14:38,440 --> 00:14:42,200
Speaker 5: just psychological in nature. We're remembering when toilet paper wasn't

285
00:14:42,200 --> 00:14:45,040
Speaker 5: available at COVID and so people are going to stockpile

286
00:14:45,400 --> 00:14:48,080
Speaker 5: toilet paper now. But what else will they stockpile? And

287
00:14:48,120 --> 00:14:50,080
Speaker 5: who else is going to be affected by this and

288
00:14:50,120 --> 00:14:52,640
Speaker 5: lose their jobs because supplies that they need to do

289
00:14:52,680 --> 00:14:56,160
Speaker 5: their jobs haven't arrived. It's really going to be devastating

290
00:14:56,320 --> 00:14:57,720
Speaker 5: if this doesn't get resolved soon.

291
00:14:58,240 --> 00:15:02,120
Speaker 3: So Jessco, what has anyone on either side quantified the

292
00:15:02,760 --> 00:15:05,680
Speaker 3: job potential job loss from automation? How big of an

293
00:15:05,720 --> 00:15:06,720
Speaker 3: issue is this in reality?

294
00:15:06,800 --> 00:15:07,120
Speaker 2: Do we know?

295
00:15:08,360 --> 00:15:11,080
Speaker 5: There are a lot of analysts making estimates on the

296
00:15:11,200 --> 00:15:14,240
Speaker 5: cost that this strike will have and the ranges are

297
00:15:14,400 --> 00:15:18,400
Speaker 5: significantly wide, so it's unclear and the job costs we

298
00:15:18,520 --> 00:15:22,880
Speaker 5: can only speak right now philosophically, as construction materials don't arrive,

299
00:15:22,960 --> 00:15:25,240
Speaker 5: when construction workers are not going to be able to

300
00:15:25,280 --> 00:15:27,520
Speaker 5: do their jobs, and so they will be laid off

301
00:15:27,600 --> 00:15:31,440
Speaker 5: or temporarily furloughed, and that impact will be devastating on

302
00:15:31,680 --> 00:15:34,880
Speaker 5: those workers. So if you think about the union, workers

303
00:15:34,880 --> 00:15:38,040
Speaker 5: are being very selfish right now, and they do want

304
00:15:38,240 --> 00:15:41,320
Speaker 5: the American worker and consumer to feel the pain. They're

305
00:15:41,320 --> 00:15:44,640
Speaker 5: counting on it, they're looking forward to that, and I

306
00:15:44,680 --> 00:15:46,880
Speaker 5: think one of the devastating things here is that they're

307
00:15:46,920 --> 00:15:50,760
Speaker 5: saying and don't blame us, blame them, So they're not

308
00:15:50,880 --> 00:15:53,640
Speaker 5: taking accountability for the strategy. And I also don't think

309
00:15:53,640 --> 00:15:57,360
Speaker 5: it's very logical because the American worker and consumer is

310
00:15:57,400 --> 00:16:00,400
Speaker 5: going to become outraged and say, you know what, that

311
00:16:00,480 --> 00:16:03,400
Speaker 5: we want them to automate because this is a danger

312
00:16:03,520 --> 00:16:08,080
Speaker 5: to the American culture, society, workplace, labor market, all.

313
00:16:07,960 --> 00:16:11,040
Speaker 6: Of it Protisica. In terms of the actual dock workers

314
00:16:11,040 --> 00:16:13,920
Speaker 6: about twenty five thousand at the East Coast and Gulf

315
00:16:14,000 --> 00:16:18,920
Speaker 6: Coast ports. What percentage or number of those workers would

316
00:16:19,000 --> 00:16:21,840
Speaker 6: be at risk of losing their jobs if automation were

317
00:16:22,120 --> 00:16:24,080
Speaker 6: to be implemented at a grand scale.

318
00:16:25,520 --> 00:16:27,840
Speaker 5: It all depends on what we're talking about with regards

319
00:16:27,880 --> 00:16:30,800
Speaker 5: to automation. So the schedulers will lose their job if

320
00:16:30,840 --> 00:16:34,240
Speaker 5: we implement time cards. Right now, there is already some

321
00:16:34,560 --> 00:16:36,920
Speaker 5: automation if you think about it. I was listening to

322
00:16:36,960 --> 00:16:40,280
Speaker 5: an interview with one of the union strikers yesterday and

323
00:16:40,320 --> 00:16:44,080
Speaker 5: he said, you know, decades ago, we were literally offloading

324
00:16:44,080 --> 00:16:46,720
Speaker 5: one hundred and twenty five pounds of sugar with our hands.

325
00:16:46,800 --> 00:16:49,720
Speaker 5: So that's not happening anymore. That's because of automation, and

326
00:16:49,760 --> 00:16:52,640
Speaker 5: I'm sure that they celebrate it. So the where automation

327
00:16:52,840 --> 00:16:55,440
Speaker 5: is allowed and where automation isn't allowed is exactly what's

328
00:16:55,480 --> 00:16:59,000
Speaker 5: under negotiation. There is already in their current contract language

329
00:16:59,080 --> 00:17:03,000
Speaker 5: that prevents new automation. They're not saying that they're okay

330
00:17:03,040 --> 00:17:05,680
Speaker 5: with that language though, they're wanting to go backwards. They're

331
00:17:05,720 --> 00:17:09,560
Speaker 5: wanting to remove automation that's already been implemented, and so

332
00:17:09,760 --> 00:17:12,440
Speaker 5: that's really regressive and not progressive at all.

333
00:17:12,800 --> 00:17:14,479
Speaker 3: All right, Well, have to see how this plays out

334
00:17:14,480 --> 00:17:17,040
Speaker 3: where day three and again the tensions are mounting, the

335
00:17:17,080 --> 00:17:19,159
Speaker 3: risks are mounting for the economy. Jessica Kregel, thank you

336
00:17:19,240 --> 00:17:21,439
Speaker 3: so much for joining us. We really appreciate getting your

337
00:17:21,440 --> 00:17:24,679
Speaker 3: thoughts of perspective. Jessica Kriegel. She's a chief scientist of

338
00:17:24,960 --> 00:17:28,680
Speaker 3: workplace culture on the firm is called Culture Partners. They're

339
00:17:28,680 --> 00:17:31,880
Speaker 3: based in Sacramento, California, and she's joining us via zoom.

340
00:17:33,240 --> 00:17:37,119
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

341
00:17:37,200 --> 00:17:40,720
Speaker 1: weekdays at ten am Eastern on applecar Play and Android

342
00:17:40,760 --> 00:17:43,520
Speaker 1: Auto with the Bloomberg Business App. You can also listen

343
00:17:43,640 --> 00:17:46,720
Speaker 1: live on Amazon Alexa from our flagship New York station,

344
00:17:47,119 --> 00:17:50,159
Speaker 1: Just say Alexa Play Bloomberg eleven thirty.

345
00:17:51,200 --> 00:17:54,159
Speaker 3: Billy Lipscholtz sitting in for Alex Steele on Paulswuni. We

346
00:17:54,200 --> 00:17:56,760
Speaker 3: live here on a Bloomberg and Arctive Brookers studio, which

347
00:17:56,760 --> 00:17:59,840
Speaker 3: on Tucker We're assell streaming live on YouTube dot com.

348
00:18:00,320 --> 00:18:02,879
Speaker 3: You can find us over there just search Bloomberg Live Radio.

349
00:18:03,800 --> 00:18:04,720
Speaker 2: You know, we're a little bit.

350
00:18:04,680 --> 00:18:06,359
Speaker 3: Of a sell off here today, A lot of just

351
00:18:06,400 --> 00:18:08,239
Speaker 3: kind of mixed trading here, all within one or two

352
00:18:08,280 --> 00:18:09,440
Speaker 3: percent of the all time highs.

353
00:18:09,480 --> 00:18:11,560
Speaker 2: I mean why not? I mean, I guess you got a.

354
00:18:11,560 --> 00:18:14,439
Speaker 3: Fed cutting rates, you got decent earnings. I guess that's

355
00:18:14,480 --> 00:18:16,720
Speaker 3: a pretty constructive look for this market. I want to

356
00:18:16,760 --> 00:18:18,480
Speaker 3: how the technicals look. Our next guest, I think can

357
00:18:18,520 --> 00:18:20,919
Speaker 3: help us a little bit there. Francis Stacy chairwoman of

358
00:18:20,960 --> 00:18:24,200
Speaker 3: the Global Digital Finance Committee, joining us from Tampa, Florida

359
00:18:24,280 --> 00:18:27,840
Speaker 3: via zoom. Francis Again, you look at this charge kind

360
00:18:27,840 --> 00:18:29,840
Speaker 3: of up into the right here. What are the technicals

361
00:18:29,880 --> 00:18:32,840
Speaker 3: tell you about this market? Anything concerning you?

362
00:18:34,359 --> 00:18:37,080
Speaker 10: Yeah, So it's very interesting because the technicals actually look

363
00:18:37,200 --> 00:18:40,000
Speaker 10: quite toppy. And I do think that if the S

364
00:18:40,040 --> 00:18:42,679
Speaker 10: ANDP gains any kind of momentum and a bit of

365
00:18:42,680 --> 00:18:45,399
Speaker 10: a sellof which is you know, could be news driven.

366
00:18:45,440 --> 00:18:48,800
Speaker 10: We've got a big jobs number coming out tomorrow, you know.

367
00:18:49,040 --> 00:18:51,680
Speaker 10: I think fifty six twenty five is the initial stop

368
00:18:51,720 --> 00:18:55,320
Speaker 10: for support to indicate that the upward trend is as

369
00:18:55,359 --> 00:18:58,040
Speaker 10: well in play, and there's nothing that's coming on the horizon.

370
00:18:58,040 --> 00:19:01,080
Speaker 10: As far as calculating an additional risk, I agree with you.

371
00:19:01,200 --> 00:19:05,080
Speaker 10: The FED is obviously changed its modality into an easing mode,

372
00:19:05,240 --> 00:19:08,800
Speaker 10: and that's happening globally. I mean, the global money supply

373
00:19:08,920 --> 00:19:12,359
Speaker 10: is up seven point three trillion as of September, and

374
00:19:12,520 --> 00:19:15,160
Speaker 10: just globally we're getting a lot of simultaneous rate cutting

375
00:19:15,240 --> 00:19:19,439
Speaker 10: and that supports the reacceleration and global growth type mindset.

376
00:19:20,520 --> 00:19:22,520
Speaker 10: I do think we'll see a little bit more softening

377
00:19:22,560 --> 00:19:24,919
Speaker 10: in the growth and labor markets here in the US,

378
00:19:25,080 --> 00:19:27,800
Speaker 10: and we just have to see if there's a catalyst

379
00:19:28,200 --> 00:19:31,240
Speaker 10: that would indicate a recession, Well, how.

380
00:19:31,200 --> 00:19:33,280
Speaker 6: Much is that recession risk being priced in. I'm just

381
00:19:33,320 --> 00:19:36,439
Speaker 6: looking at the swaps market, and at least as it

382
00:19:36,440 --> 00:19:38,520
Speaker 6: relates to the FED, we're at an implied rate at

383
00:19:38,520 --> 00:19:40,439
Speaker 6: a round three and a half percent by May of

384
00:19:40,520 --> 00:19:43,639
Speaker 6: next year. In VideA is kind of the S and

385
00:19:43,680 --> 00:19:46,640
Speaker 6: P one, if you will, and is seemingly talking up demand.

386
00:19:46,720 --> 00:19:49,960
Speaker 6: Apple and Microsoftware are relatively bullish as well.

387
00:19:50,119 --> 00:19:51,560
Speaker 2: Kind of what do you make of those dynamics.

388
00:19:52,840 --> 00:19:56,000
Speaker 10: Yeah, so absolutely there's no indication and the markets are

389
00:19:56,040 --> 00:19:58,680
Speaker 10: not pricing in an indication of a recession, which makes

390
00:19:58,760 --> 00:20:01,120
Speaker 10: this rate cutting and a regressive rate cutting, I would

391
00:20:01,160 --> 00:20:04,840
Speaker 10: argue globally very interesting. I mean, I think they're cutting

392
00:20:04,920 --> 00:20:07,400
Speaker 10: rates globally on the orders of magnitude that they did

393
00:20:07,480 --> 00:20:12,040
Speaker 10: during the you know, the global financial crisis. Without that

394
00:20:12,160 --> 00:20:16,040
Speaker 10: catalyst in place. It's just basically looking at the yield

395
00:20:16,119 --> 00:20:19,120
Speaker 10: curve and potential. You know what happens when you have

396
00:20:19,200 --> 00:20:23,080
Speaker 10: a prolonged and yield curve inversion that is, you know,

397
00:20:23,240 --> 00:20:28,000
Speaker 10: pretty severe and you have the resteepening quinte essentially that

398
00:20:28,040 --> 00:20:32,200
Speaker 10: has been an indicator mechanically of an imminent recession. However,

399
00:20:32,680 --> 00:20:35,440
Speaker 10: there was always a catalyst. You know, in the nineties

400
00:20:35,520 --> 00:20:39,480
Speaker 10: you had the invasion, you know, the Kuwait situation, and

401
00:20:39,520 --> 00:20:41,960
Speaker 10: the two thousands you had the tech bubble bursting, and

402
00:20:42,000 --> 00:20:44,000
Speaker 10: then of course with the GFC you had the housing

403
00:20:44,000 --> 00:20:47,800
Speaker 10: bubble burst that sort of tipped that domino effect. Right now,

404
00:20:47,800 --> 00:20:50,040
Speaker 10: there's nothing in the system, and certainly, as you say,

405
00:20:50,040 --> 00:20:52,320
Speaker 10: not being priced in that that domino effect is ready

406
00:20:52,320 --> 00:20:55,480
Speaker 10: to be tipped. But you know, sometimes these things happen

407
00:20:55,840 --> 00:20:57,000
Speaker 10: slowly and then all at once.

408
00:20:57,920 --> 00:21:00,680
Speaker 3: So overall, I mean here it's it seems like again

409
00:21:00,720 --> 00:21:03,879
Speaker 3: the backdrop for a lot of the the bull seems

410
00:21:03,920 --> 00:21:06,560
Speaker 3: pretty simple. I've got decer earnings growth, I got of

411
00:21:06,880 --> 00:21:11,119
Speaker 3: interest rates coming down. Is the recession risk something that

412
00:21:11,119 --> 00:21:14,200
Speaker 3: could really be upset that kind of foundation.

413
00:21:15,480 --> 00:21:18,000
Speaker 10: Yes, certainly if there's a catalyst, and we do have

414
00:21:18,119 --> 00:21:22,480
Speaker 10: some potential catalysts in our geopolitical environment. I don't know

415
00:21:22,640 --> 00:21:25,440
Speaker 10: sort of what volatility the election outcome could enter into

416
00:21:25,440 --> 00:21:27,520
Speaker 10: the system. So we just you know, we just have

417
00:21:27,600 --> 00:21:29,560
Speaker 10: to watch the catalyst. We have to, as you say,

418
00:21:29,720 --> 00:21:32,800
Speaker 10: you know, watch the spreads, watch the swaps and see

419
00:21:32,800 --> 00:21:35,920
Speaker 10: if there's any sort of a reaction there. It's interesting

420
00:21:36,040 --> 00:21:40,119
Speaker 10: because from the role of my new committee, and I've

421
00:21:40,160 --> 00:21:44,359
Speaker 10: brought in John Degastino, who's very storied as my co chair,

422
00:21:45,040 --> 00:21:47,520
Speaker 10: we are looking at the fiscal and debt dynamics around

423
00:21:47,560 --> 00:21:50,720
Speaker 10: the world, and we are engaging countries and looking at

424
00:21:50,760 --> 00:21:54,399
Speaker 10: the new prominence of global digital finance and what that

425
00:21:54,480 --> 00:21:57,119
Speaker 10: algorithm looks like. Because here's the thing. You put a

426
00:21:57,160 --> 00:21:59,960
Speaker 10: record amount of monetary and fiscal stimulus and you know,

427
00:22:00,640 --> 00:22:03,760
Speaker 10: pretty much globally, but the most in the US during COVID,

428
00:22:04,160 --> 00:22:07,080
Speaker 10: and then you know, something like the mechanical implications of

429
00:22:07,119 --> 00:22:10,959
Speaker 10: the yield curven version. We've seen an elongation of the

430
00:22:11,000 --> 00:22:14,480
Speaker 10: seasons of these economic cycles, and so the question becomes,

431
00:22:15,080 --> 00:22:18,760
Speaker 10: have the mechanics fundamentally changed post COVID or do we

432
00:22:18,880 --> 00:22:21,679
Speaker 10: have the same mechanics in place on a delay. And

433
00:22:21,720 --> 00:22:24,720
Speaker 10: then also just looking at the liquidity dynamics around the

434
00:22:24,720 --> 00:22:27,960
Speaker 10: world juxtaposed to the debt and looking at the potential

435
00:22:28,080 --> 00:22:30,639
Speaker 10: a potential new algorithm for the managing of this, the

436
00:22:30,680 --> 00:22:34,480
Speaker 10: managing of recession risk, you know, with the integration of

437
00:22:34,720 --> 00:22:39,000
Speaker 10: the digital finance component, and certainly you know a potential

438
00:22:39,000 --> 00:22:40,360
Speaker 10: for digital currencies as well.

439
00:22:41,000 --> 00:22:42,840
Speaker 6: So are you talking we're talking bitcoin?

440
00:22:42,920 --> 00:22:44,720
Speaker 2: Is that what you're kind of alluding to?

441
00:22:46,160 --> 00:22:49,200
Speaker 10: Bitcoin will never replace fiat because it has a finite

442
00:22:49,240 --> 00:22:53,600
Speaker 10: supply and it cannot disrupt the function of the central banks.

443
00:22:53,600 --> 00:22:56,119
Speaker 10: If it cannot do the function of the central banks.

444
00:22:56,400 --> 00:23:00,000
Speaker 10: Central banks adjust mone you know, money supply, and you know,

445
00:23:00,040 --> 00:23:02,040
Speaker 10: in the United States they have their dual mandate of

446
00:23:02,080 --> 00:23:05,760
Speaker 10: price stability and full employment. They could never accomplish that

447
00:23:05,840 --> 00:23:09,879
Speaker 10: because they can't manage the supply of bitcoin. But you know,

448
00:23:09,960 --> 00:23:13,760
Speaker 10: for instance, El Salvador has this hybrid approach between bitcoin

449
00:23:13,800 --> 00:23:15,920
Speaker 10: and the US dollar, and I do think that it's

450
00:23:16,040 --> 00:23:18,040
Speaker 10: kind of like trying to make an electric car talk

451
00:23:18,080 --> 00:23:21,280
Speaker 10: to an internal combustion engine. They have different underlying mechanics,

452
00:23:21,280 --> 00:23:24,479
Speaker 10: but there is potentially an algorithm possible that bridges that

453
00:23:24,560 --> 00:23:27,560
Speaker 10: gap and brings in a digital currency. I do think

454
00:23:27,600 --> 00:23:31,000
Speaker 10: if we see digital currencies, you know, obviously Bitcoin is

455
00:23:31,040 --> 00:23:34,000
Speaker 10: legal tender and El Salvador, but if we do see

456
00:23:34,000 --> 00:23:37,080
Speaker 10: digital currencies widely adopted as legal tender, it's going to

457
00:23:37,119 --> 00:23:40,040
Speaker 10: be the central banking digital currencies because those are the

458
00:23:40,080 --> 00:23:42,440
Speaker 10: only things that can disrupt what the central bank is doing.

459
00:23:42,760 --> 00:23:45,560
Speaker 10: The Central Bank has been given all of the legal authority,

460
00:23:45,600 --> 00:23:48,840
Speaker 10: has all of the legal precedent from Congress, and you

461
00:23:48,880 --> 00:23:51,920
Speaker 10: know that's you're not likely to unmock that anytime soon.

462
00:23:52,520 --> 00:23:54,560
Speaker 10: So I do think that there's going to be an

463
00:23:54,560 --> 00:23:58,320
Speaker 10: opportunity coming up. But that's that's what we're really looking

464
00:23:58,359 --> 00:23:59,240
Speaker 10: at systemically.

465
00:23:59,760 --> 00:24:00,320
Speaker 2: Very interesting.

466
00:24:00,320 --> 00:24:02,600
Speaker 3: Francis Stacey, thank you so much for joining us. Francis Stacey,

467
00:24:02,640 --> 00:24:05,760
Speaker 3: she's a chairwoman of the Global Digital Finance Committee. Joining

468
00:24:05,800 --> 00:24:06,600
Speaker 3: US FRO Tampa, Florida.

469
00:24:07,000 --> 00:24:12,520
Speaker 1: Via zoom you're listening to the Bloomberg Intelligence Podcast. Catch

470
00:24:12,560 --> 00:24:15,920
Speaker 1: us live weekdays at ten am Eastern on applecar Play

471
00:24:15,960 --> 00:24:18,800
Speaker 1: and Android Auto with the Bloomberg Business app. You can

472
00:24:18,840 --> 00:24:22,080
Speaker 1: also listen live on Amazon Alexa from our flagship New

473
00:24:22,119 --> 00:24:25,760
Speaker 1: York station just say Alexa playing Bloomberg eleven thirty.

474
00:24:26,920 --> 00:24:29,040
Speaker 3: Another big news in the tech spasis, some of the

475
00:24:29,160 --> 00:24:31,679
Speaker 3: valuations they are coming back, it seems to think in

476
00:24:31,680 --> 00:24:33,639
Speaker 3: a big ways, particularly if you have anything to do

477
00:24:34,000 --> 00:24:35,880
Speaker 3: with AI. So if you have a company that's called

478
00:24:36,240 --> 00:24:39,119
Speaker 3: open ai, that's a pretty good name to happen, a

479
00:24:39,119 --> 00:24:41,639
Speaker 3: pretty good time to raise capital. OpenAI I just raised

480
00:24:41,760 --> 00:24:44,440
Speaker 3: six point six billion dollars in the private markets and

481
00:24:44,520 --> 00:24:47,560
Speaker 3: new funding, giving the artificial intelligence company a one hundred

482
00:24:47,560 --> 00:24:51,480
Speaker 3: and fifty seven billion dollar valuation as a look to

483
00:24:51,560 --> 00:24:54,960
Speaker 3: build the world's leading generative AI technology. Check in with

484
00:24:55,040 --> 00:24:57,200
Speaker 3: it somebody who knows this stuff really well. On a

485
00:24:57,280 --> 00:25:01,000
Speaker 3: rock run of technology channels for Bloomberg Intelligence from the

486
00:25:01,080 --> 00:25:05,800
Speaker 3: tech hub of Chicago, Illinois, anurag talks about open Ai.

487
00:25:05,880 --> 00:25:06,000
Speaker 1: Here.

488
00:25:06,040 --> 00:25:08,639
Speaker 3: These are some real numbers here on a rock, and

489
00:25:08,680 --> 00:25:11,480
Speaker 3: there's some real investors investing in this company.

490
00:25:11,520 --> 00:25:12,760
Speaker 2: At this stage, what do we know?

491
00:25:14,040 --> 00:25:16,080
Speaker 11: Yeah, open air has really taken a lead over the

492
00:25:16,160 --> 00:25:19,080
Speaker 11: last three years because of the launch of chat GPT

493
00:25:19,200 --> 00:25:21,640
Speaker 11: and after that it has become to go to things

494
00:25:21,680 --> 00:25:25,040
Speaker 11: even for enterprises. We recently did a CIO survey and

495
00:25:25,119 --> 00:25:28,520
Speaker 11: open Ai Microsoft combination was far ahead than all the

496
00:25:28,560 --> 00:25:30,600
Speaker 11: other large language models that was out there.

497
00:25:30,760 --> 00:25:33,040
Speaker 7: So that's on the enterprise side and consumer side.

498
00:25:33,040 --> 00:25:35,520
Speaker 11: We already know how well they are doing both on

499
00:25:35,560 --> 00:25:39,040
Speaker 11: the app that they're selling along with the distribution that

500
00:25:39,080 --> 00:25:42,600
Speaker 11: they what they won with Apple being part of CD

501
00:25:42,720 --> 00:25:45,040
Speaker 11: when the software upgrade is going to come. So open

502
00:25:45,040 --> 00:25:48,439
Speaker 11: ai in the world of large language models really at

503
00:25:48,480 --> 00:25:51,080
Speaker 11: the top of the you know, the top of the

504
00:25:51,119 --> 00:25:53,280
Speaker 11: mountain at this point, and this is one of the

505
00:25:53,320 --> 00:25:55,400
Speaker 11: reasons you're getting these high valuations.

506
00:25:55,640 --> 00:25:57,919
Speaker 6: Yeah, I just want to put into perspective, at one

507
00:25:58,000 --> 00:26:00,399
Speaker 6: hundred and fifty seven billion dollars, open AI would be

508
00:26:00,560 --> 00:26:03,560
Speaker 6: larger than uber and at that six point six billion

509
00:26:03,600 --> 00:26:07,320
Speaker 6: dollars in funding relative to IPOs, it would be the

510
00:26:07,359 --> 00:26:13,600
Speaker 6: twelfth largest global IPO since twenty eighteen. So anorak, are

511
00:26:13,640 --> 00:26:16,920
Speaker 6: we in a AI bubble as it relates to private markets?

512
00:26:18,359 --> 00:26:19,880
Speaker 11: I think, to be very frank with you, I can

513
00:26:19,920 --> 00:26:22,199
Speaker 11: only answer that five years from now. But we just

514
00:26:22,480 --> 00:26:26,520
Speaker 11: you know, updated our numbers looking at capital expenditures for

515
00:26:26,600 --> 00:26:31,800
Speaker 11: the top five six companies. These companies, which includes Amazon, Microsoft, Meta, Oracle,

516
00:26:31,800 --> 00:26:34,520
Speaker 11: et cetera. In twenty twenty three, they spend about one

517
00:26:34,600 --> 00:26:36,800
Speaker 11: hundred and ten billion dollars in all the things what

518
00:26:36,840 --> 00:26:40,240
Speaker 11: we call capital expenditures. In twenty twenty five, they're going

519
00:26:40,280 --> 00:26:42,439
Speaker 11: to spend about two hundred billion dollars. So that's a

520
00:26:42,520 --> 00:26:45,080
Speaker 11: massive increase of ninety billion over a two year period.

521
00:26:45,359 --> 00:26:46,720
Speaker 7: You know, where is that money going to?

522
00:26:46,840 --> 00:26:50,440
Speaker 11: Expansion of data center, buying more GPUs, buying more hardware,

523
00:26:51,119 --> 00:26:55,560
Speaker 11: expanding their own large language models. So it really feels real, frankly,

524
00:26:55,600 --> 00:26:57,920
Speaker 11: as to the amount of money that the big guys

525
00:26:57,920 --> 00:27:00,919
Speaker 11: are spending it over here, they won't be doing it

526
00:27:00,960 --> 00:27:02,880
Speaker 11: if they didn't see the demand on the other side

527
00:27:02,920 --> 00:27:03,520
Speaker 11: of the equation.

528
00:27:04,200 --> 00:27:07,520
Speaker 3: It's been a turbulent year for the company here. I know,

529
00:27:07,600 --> 00:27:11,200
Speaker 3: last November the company's board fired and then quickly re

530
00:27:11,320 --> 00:27:14,360
Speaker 3: hired the CEO, Sam Altman. Following months at a lot

531
00:27:14,359 --> 00:27:17,520
Speaker 3: of key leaders leave, including the co founder, the chief

532
00:27:17,560 --> 00:27:21,480
Speaker 3: technology officer. It seems like the market's kind of forgotten

533
00:27:21,480 --> 00:27:23,880
Speaker 3: all about that, or maybe it's not a problem anymore.

534
00:27:24,480 --> 00:27:26,800
Speaker 3: How's the market dealing with some of that turmoil we've

535
00:27:26,800 --> 00:27:27,640
Speaker 3: seen over the last year.

536
00:27:28,960 --> 00:27:31,439
Speaker 11: I think people tend to forget that who's really behind

537
00:27:31,520 --> 00:27:35,159
Speaker 11: a lot of backing of this particular company, and that's Microsoft,

538
00:27:35,200 --> 00:27:39,480
Speaker 11: and you know they have the biggest distribution and among enterprises.

539
00:27:39,760 --> 00:27:42,560
Speaker 11: So if they are basically telling people, if you want

540
00:27:42,560 --> 00:27:46,480
Speaker 11: to create an enterprise application using some AI large language model,

541
00:27:46,800 --> 00:27:49,159
Speaker 11: here is open a model and you can host it

542
00:27:49,200 --> 00:27:52,080
Speaker 11: on our cloud platform, I think that is resonating very

543
00:27:52,080 --> 00:27:55,080
Speaker 11: well with customers. So as long as that continues for

544
00:27:55,119 --> 00:27:57,960
Speaker 11: the next several years, open AI's revenue will continue to

545
00:27:58,000 --> 00:28:00,480
Speaker 11: go up. And you know, then you can and you know,

546
00:28:00,600 --> 00:28:02,320
Speaker 11: argue whether the valuations is high or not.

547
00:28:02,920 --> 00:28:05,400
Speaker 6: And just from the bloom we're reporting Tiger Global put

548
00:28:05,440 --> 00:28:07,960
Speaker 6: in three hundred and fifty million dollars, Ultimeter putting in

549
00:28:07,960 --> 00:28:09,679
Speaker 6: at least two hundred and fifty million dollars. But to

550
00:28:09,720 --> 00:28:13,320
Speaker 6: your point, if Microsoft is able to write such large checks,

551
00:28:13,400 --> 00:28:17,320
Speaker 6: how does that impact the funding environment for AI companies.

552
00:28:17,359 --> 00:28:19,960
Speaker 6: I'm just thinking about the biggest competitors for open ai

553
00:28:20,080 --> 00:28:21,439
Speaker 6: in Anthropic and Xai.

554
00:28:22,760 --> 00:28:25,200
Speaker 11: Yeah, I mean, Anthropic is backed by you know, Amazon

555
00:28:25,200 --> 00:28:28,080
Speaker 11: Web Services at this point primarily, and almost all the others.

556
00:28:28,320 --> 00:28:30,680
Speaker 11: The one thing we heard, you know, from reporting from

557
00:28:30,680 --> 00:28:33,480
Speaker 11: Bloomberg News is that open ai is asking them not

558
00:28:33,560 --> 00:28:36,879
Speaker 11: to back up you know, Elon's Xai or others. And

559
00:28:36,960 --> 00:28:38,840
Speaker 11: I think that's partially the reason you see all the

560
00:28:38,880 --> 00:28:42,160
Speaker 11: other plays coming in because and by the way, there's

561
00:28:42,160 --> 00:28:43,560
Speaker 11: not going to be one winner, They're going to be

562
00:28:43,640 --> 00:28:46,520
Speaker 11: multiple models. They're going to be multiple companies doing well here.

563
00:28:47,120 --> 00:28:50,120
Speaker 11: And there is no reason Anthropic don't thrive in this way,

564
00:28:50,280 --> 00:28:53,120
Speaker 11: or Mistral or all the other large language model companies.

565
00:28:53,880 --> 00:28:57,280
Speaker 3: What do we know about open AI's financials, If anything.

566
00:28:58,280 --> 00:29:00,440
Speaker 7: It's I mean, I don't have a clear pick on it.

567
00:29:00,480 --> 00:29:02,600
Speaker 11: I've read as much as you have, and you know,

568
00:29:02,640 --> 00:29:05,160
Speaker 11: we have seen projections out there for the next several

569
00:29:05,280 --> 00:29:07,200
Speaker 11: years they can get to I don't know, five billion,

570
00:29:07,240 --> 00:29:09,800
Speaker 11: ten billion or so forth. So I mean it's it's

571
00:29:09,920 --> 00:29:11,960
Speaker 11: unless we see the s one when they go public,

572
00:29:12,760 --> 00:29:15,160
Speaker 11: you know, up till at that point, you know, it's

573
00:29:15,200 --> 00:29:16,480
Speaker 11: it's it's purely a guess work.

574
00:29:16,560 --> 00:29:18,800
Speaker 3: Do we have any sense of do they have an

575
00:29:18,840 --> 00:29:21,280
Speaker 3: appetite to go public? Is it a sense of timing?

576
00:29:21,480 --> 00:29:24,120
Speaker 3: What are their plans for going public if any?

577
00:29:25,160 --> 00:29:25,360
Speaker 7: See?

578
00:29:25,360 --> 00:29:27,120
Speaker 11: My personal view is they don't need to go public

579
00:29:27,160 --> 00:29:29,760
Speaker 11: at all. They don't need the funding they will you know,

580
00:29:29,800 --> 00:29:32,720
Speaker 11: the whoever is part of this particular ecosystem is getting

581
00:29:32,760 --> 00:29:35,680
Speaker 11: rich every day. I think they should figure out how

582
00:29:35,680 --> 00:29:39,000
Speaker 11: to grab as much enterprise workloads as possible before they

583
00:29:39,040 --> 00:29:41,520
Speaker 11: think about it, because one thing is for sure, even

584
00:29:41,560 --> 00:29:44,080
Speaker 11: as they are doing this land grabbing right now, they're

585
00:29:44,120 --> 00:29:45,640
Speaker 11: at a loss, and they will be at a loss

586
00:29:45,680 --> 00:29:48,479
Speaker 11: for several years out because the cost of running these

587
00:29:48,520 --> 00:29:51,120
Speaker 11: workloads is very high and it's going to you know,

588
00:29:51,160 --> 00:29:52,760
Speaker 11: you're not going to see any free cash flow. You're

589
00:29:52,760 --> 00:29:55,080
Speaker 11: not going to see any But once you've got public,

590
00:29:55,240 --> 00:29:57,240
Speaker 11: you know, you really go under the lens when it's

591
00:29:57,280 --> 00:29:59,080
Speaker 11: about profitability and your margins.

592
00:29:59,480 --> 00:30:02,080
Speaker 6: Well about thirty seconds. But going back to a story

593
00:30:02,080 --> 00:30:04,720
Speaker 6: that has been reported out recently in terms of giving

594
00:30:04,840 --> 00:30:07,120
Speaker 6: Altman a stake in the company that could be worth

595
00:30:07,120 --> 00:30:08,800
Speaker 6: more than ten billion dollars, what do you make of

596
00:30:08,960 --> 00:30:10,960
Speaker 6: those conversations and what that could mean for the company

597
00:30:11,000 --> 00:30:11,800
Speaker 6: and its ambitions.

598
00:30:13,160 --> 00:30:15,160
Speaker 11: Yeah, I mean he's always talked about how he is

599
00:30:15,200 --> 00:30:17,440
Speaker 11: doing it for the greater good of the world. But

600
00:30:17,680 --> 00:30:19,400
Speaker 11: but I guess when you get this much options, you

601
00:30:19,680 --> 00:30:21,000
Speaker 11: change your mind on that.

602
00:30:21,360 --> 00:30:23,640
Speaker 7: But it's it is what it is.

603
00:30:24,600 --> 00:30:26,440
Speaker 2: It is what it is. We always fall back on

604
00:30:26,440 --> 00:30:26,680
Speaker 2: that one.

605
00:30:26,720 --> 00:30:29,360
Speaker 3: I love it on a Ragranet technolog channels Bloomberg Intelligence

606
00:30:29,400 --> 00:30:33,400
Speaker 3: joinings today talking about open Ai again. Just a huge,

607
00:30:33,480 --> 00:30:36,320
Speaker 3: huge funding round six point six billion dollars raised and

608
00:30:36,360 --> 00:30:39,280
Speaker 3: giving the company an evaluation of one hundred and fifty

609
00:30:39,280 --> 00:30:42,000
Speaker 3: seven billion. That's just massive and impressive in and of itself.

610
00:30:42,120 --> 00:30:44,280
Speaker 3: What's also impressive to me is who's going in there.

611
00:30:44,320 --> 00:30:47,480
Speaker 3: We're getting some big, big technology companies, including Nvidia, some

612
00:30:47,800 --> 00:30:51,920
Speaker 3: seriously smart private equity money, private capital money including the

613
00:30:52,120 --> 00:30:55,800
Speaker 3: Tiger and some others, and Fidelity as well. So a

614
00:30:55,800 --> 00:30:57,680
Speaker 3: lot of what a lot of folks would call smart

615
00:30:57,680 --> 00:31:01,320
Speaker 3: money getting in even at this value oation level. That

616
00:31:01,400 --> 00:31:03,400
Speaker 3: gets your attention here, so we'll keep an eye on that.

617
00:31:05,040 --> 00:31:08,920
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

618
00:31:09,000 --> 00:31:12,520
Speaker 1: weekdays at ten am Eastern on applecard Play and Android

619
00:31:12,520 --> 00:31:15,320
Speaker 1: Auto with the Bloomberg Business App. You can also listen

620
00:31:15,440 --> 00:31:18,520
Speaker 1: live on Amazon Alexa from our flagship New York station,

621
00:31:18,880 --> 00:31:21,560
Speaker 1: Just Say Alexa Play Bloomberg eleven.

622
00:31:21,360 --> 00:31:25,640
Speaker 3: Thirty Barely Lipsholtz sitting in for Alex Steele today, I'm

623
00:31:25,640 --> 00:31:26,560
Speaker 3: Paul Suonier live.

624
00:31:26,400 --> 00:31:28,440
Speaker 2: Here in our Bloomberg Interactive Brokers studio.

625
00:31:28,160 --> 00:31:30,440
Speaker 3: Streaming live on YouTube's at headverd YouTube dot com search

626
00:31:30,480 --> 00:31:32,640
Speaker 3: Bloomberg Live Radio on this where you will find us

627
00:31:33,040 --> 00:31:36,720
Speaker 3: which s are from the CEO of Levi Strauss, Michelle

628
00:31:36,720 --> 00:31:38,800
Speaker 3: Gost talking about the business. Let's do a little bit

629
00:31:38,800 --> 00:31:41,680
Speaker 3: more retail here, Mary Ross Gilbert. She's a senior equity

630
00:31:41,680 --> 00:31:44,360
Speaker 3: analyst for Bloomberg Intelligence covering the retail space. She's based

631
00:31:44,400 --> 00:31:46,800
Speaker 3: out there in Los Angeles. Mary, what did you make

632
00:31:46,960 --> 00:31:50,920
Speaker 3: of We'll just start with the Levi's story. What did

633
00:31:50,960 --> 00:31:53,320
Speaker 3: you make of their their quarter, their outlook and kind

634
00:31:53,320 --> 00:31:55,360
Speaker 3: of maybe some of the reasoning for some of the

635
00:31:55,360 --> 00:31:56,200
Speaker 3: weakness they're seeing.

636
00:31:57,880 --> 00:32:02,160
Speaker 12: Yeah, so, Paul, the Levi's earnings out yesterday, I think

637
00:32:02,200 --> 00:32:04,640
Speaker 12: there was too much focus on some of the negativity,

638
00:32:04,680 --> 00:32:07,480
Speaker 12: so for example, weakness in China. China is only two

639
00:32:07,520 --> 00:32:11,440
Speaker 12: percent of the business and still the growth prospects there

640
00:32:11,520 --> 00:32:14,440
Speaker 12: are tremendous, but we have been hearing that there has

641
00:32:14,480 --> 00:32:17,320
Speaker 12: been some weakness generally with the consumer. But also I

642
00:32:17,320 --> 00:32:20,200
Speaker 12: think there's some execution opportunities there. So they did bring

643
00:32:20,240 --> 00:32:23,800
Speaker 12: in a new leader, so I think we could see

644
00:32:23,840 --> 00:32:27,240
Speaker 12: things shift, but frankly, it's really really small if you

645
00:32:27,280 --> 00:32:30,040
Speaker 12: look at what's happening in the bigger parts of the business.

646
00:32:30,080 --> 00:32:34,760
Speaker 12: The overall Levi's business on a currency neutral basis was up,

647
00:32:34,880 --> 00:32:36,720
Speaker 12: and if you look at direct to consumer and that's

648
00:32:36,720 --> 00:32:39,280
Speaker 12: about forty four percent of the business, that was up

649
00:32:39,360 --> 00:32:43,720
Speaker 12: twelve percent. The USDTC was up twelve percent, Europe was

650
00:32:43,800 --> 00:32:48,120
Speaker 12: up nine percent, and also the European wholesale business turned

651
00:32:48,240 --> 00:32:52,280
Speaker 12: positive and comped up four percent, and then they have

652
00:32:52,320 --> 00:32:55,760
Speaker 12: a strong order book for the fourth quarter. US wholesale

653
00:32:55,760 --> 00:32:59,440
Speaker 12: though is still you know, trending negative. It's improving, but

654
00:32:59,560 --> 00:33:01,520
Speaker 12: still noative. So you do have a little bit of

655
00:33:01,560 --> 00:33:04,600
Speaker 12: headwinds there, but like I said, the big focus is

656
00:33:04,600 --> 00:33:07,520
Speaker 12: really on DTC, it's on women's. The women's business is

657
00:33:07,560 --> 00:33:10,120
Speaker 12: about thirty five percent of sales, but that could be

658
00:33:10,160 --> 00:33:13,520
Speaker 12: half the business that was also of double digits with

659
00:33:13,640 --> 00:33:18,400
Speaker 12: strong performance you know, across bottoms and tops there. So

660
00:33:18,640 --> 00:33:21,600
Speaker 12: I think there's some real strong points here. And then

661
00:33:21,640 --> 00:33:25,240
Speaker 12: the news about the sale of Dockers. That's great news.

662
00:33:25,320 --> 00:33:28,160
Speaker 12: They've tried to sell this company in the year is passed,

663
00:33:28,680 --> 00:33:31,280
Speaker 12: and it will be great to get rid of it

664
00:33:31,360 --> 00:33:34,120
Speaker 12: and really focus on the strength of the Levi's brand

665
00:33:34,600 --> 00:33:37,120
Speaker 12: and also expanding beyond yoga.

666
00:33:37,200 --> 00:33:40,360
Speaker 6: Mary, you sound really bullish and the stocks down eight percent,

667
00:33:40,800 --> 00:33:43,200
Speaker 6: So why is it getting beat so badly? I mean,

668
00:33:43,240 --> 00:33:45,720
Speaker 6: it's it's returned over the last twelve months fifty one percent.

669
00:33:45,720 --> 00:33:47,720
Speaker 6: Does it sell the news or is it just that

670
00:33:47,840 --> 00:33:50,600
Speaker 6: uncertainty From a macro perspective.

671
00:33:51,360 --> 00:33:54,840
Speaker 12: I don't think so. I think sometimes there's volatility around

672
00:33:54,880 --> 00:33:58,840
Speaker 12: earnings that don't necessarily reflect the true fundamentals. So I

673
00:33:58,880 --> 00:34:02,120
Speaker 12: think there there was a miss on the top line,

674
00:34:02,440 --> 00:34:05,480
Speaker 12: you know, on the revenue miss versus consensus, but of

675
00:34:05,480 --> 00:34:07,600
Speaker 12: course they beat on the bottom line. But I think

676
00:34:07,600 --> 00:34:11,799
Speaker 12: the real focus was okay, they said net revenues. Previously

677
00:34:11,840 --> 00:34:15,200
Speaker 12: the guidance was net revenues to rise one to three percent.

678
00:34:15,280 --> 00:34:18,040
Speaker 12: Now it's going to be just up one percent. I

679
00:34:18,080 --> 00:34:21,120
Speaker 12: don't really if anything, I view that as an opportunity

680
00:34:21,200 --> 00:34:24,160
Speaker 12: to beat. We do have the port strike, of course

681
00:34:24,200 --> 00:34:27,879
Speaker 12: that's making headlines, but Levi's and a lot of other

682
00:34:27,920 --> 00:34:34,640
Speaker 12: apparel companies have shifted more of their shipments over to

683
00:34:34,719 --> 00:34:37,600
Speaker 12: the West Coast and so and when you think about holiday,

684
00:34:38,080 --> 00:34:40,840
Speaker 12: most of that is already in. They start shipping in

685
00:34:41,400 --> 00:34:44,520
Speaker 12: July or the ports start the West coast ports start

686
00:34:44,560 --> 00:34:47,040
Speaker 12: receiving in July, and it goes all the way through September,

687
00:34:47,040 --> 00:34:50,040
Speaker 12: and September was quite busy for the West coast ports.

688
00:34:50,080 --> 00:34:54,040
Speaker 12: I checked in with the Port of Los Angeles yesterday

689
00:34:54,040 --> 00:34:59,000
Speaker 12: on that. So I think there's going to be some impact. Obviously,

690
00:34:59,360 --> 00:35:02,560
Speaker 12: it really has to do with how long the strike lasts.

691
00:35:02,600 --> 00:35:07,000
Speaker 12: But I think that Levi's, Macy's and other companies have

692
00:35:07,719 --> 00:35:09,520
Speaker 12: mitigation measures in place.

693
00:35:10,280 --> 00:35:12,560
Speaker 3: What does it mean as it relates to the port

694
00:35:12,960 --> 00:35:16,439
Speaker 3: out and cheer on margins, I mean, presumably their cost

695
00:35:16,480 --> 00:35:18,279
Speaker 3: will be hired to get some product that was East

696
00:35:18,320 --> 00:35:20,919
Speaker 3: Coast bound to get it now to the West coast.

697
00:35:21,000 --> 00:35:22,759
Speaker 2: What does that do to their margins? Of companies given

698
00:35:22,800 --> 00:35:23,720
Speaker 2: in guidance.

699
00:35:24,840 --> 00:35:27,880
Speaker 12: Yeah, there's a couple of companies that have indicated, not

700
00:35:28,000 --> 00:35:31,840
Speaker 12: all of them, so for example, Oxford Industry, so that's

701
00:35:31,960 --> 00:35:35,719
Speaker 12: the Tommy Bahama, Lily Pulitzer brands. So what they did

702
00:35:35,800 --> 00:35:39,440
Speaker 12: say is that they expect a freight negative freight impact

703
00:35:39,480 --> 00:35:42,720
Speaker 12: in the second half of about fifteen to twenty basis points,

704
00:35:43,080 --> 00:35:46,239
Speaker 12: and in that they did incorporate what they think might

705
00:35:46,280 --> 00:35:49,280
Speaker 12: be the impact from a possible because again their earnings

706
00:35:49,280 --> 00:35:51,680
Speaker 12: call was before the strike which just hit this week

707
00:35:51,719 --> 00:35:56,320
Speaker 12: on Tuesday. They said that that does incorporate that impact,

708
00:35:56,360 --> 00:35:58,840
Speaker 12: but once again it depends on the duration and just

709
00:35:58,960 --> 00:36:03,720
Speaker 12: looking back and in previous disruptions with regard to the port,

710
00:36:04,040 --> 00:36:06,279
Speaker 12: we sort of estimate it could be in that sort

711
00:36:06,320 --> 00:36:09,640
Speaker 12: of ten to twenty basis points impact on margin, But

712
00:36:10,560 --> 00:36:14,080
Speaker 12: again it depends on the duration and then also any

713
00:36:14,320 --> 00:36:18,399
Speaker 12: other mitigation factors that will help offset some of those

714
00:36:18,440 --> 00:36:19,600
Speaker 12: costs if they're able to.

715
00:36:20,080 --> 00:36:23,000
Speaker 6: And Mary, you mentioned the duration. How long does this

716
00:36:23,040 --> 00:36:25,480
Speaker 6: strike have to last for it to start to show

717
00:36:25,600 --> 00:36:27,080
Speaker 6: up and impact some of these businesses.

718
00:36:29,080 --> 00:36:33,480
Speaker 12: That is a really good question. When I think about

719
00:36:33,520 --> 00:36:36,319
Speaker 12: some of the other disruptions and the duration, and of

720
00:36:36,360 --> 00:36:38,560
Speaker 12: course the last one that happened back in the seventies,

721
00:36:38,600 --> 00:36:41,239
Speaker 12: I was sixty days, I can imagine the damage must

722
00:36:41,239 --> 00:36:46,319
Speaker 12: have been pretty extensive, and even just thinking of you know,

723
00:36:46,400 --> 00:36:50,960
Speaker 12: let's say eight days. Going back to twenty fifteen when

724
00:36:50,960 --> 00:36:55,400
Speaker 12: the West Coast ports had some you know, shutdowns, so

725
00:36:55,440 --> 00:36:58,960
Speaker 12: it wasn't actually a strike, but they were called shutdowns

726
00:36:58,960 --> 00:37:01,920
Speaker 12: at that time, and that that did last for days,

727
00:37:02,000 --> 00:37:06,279
Speaker 12: but there was an impact that lasted months after that.

728
00:37:06,800 --> 00:37:08,880
Speaker 12: So there was an impact on margin because if you

729
00:37:08,880 --> 00:37:12,480
Speaker 12: have a delay in getting your apparel, then once it

730
00:37:12,520 --> 00:37:14,880
Speaker 12: does arrive, you have to promptly mark it down. And

731
00:37:14,920 --> 00:37:18,200
Speaker 12: that's exactly what happened with Macy's on off price. They

732
00:37:18,239 --> 00:37:21,120
Speaker 12: tend to be less impacted to a certain extent because

733
00:37:21,160 --> 00:37:23,319
Speaker 12: they can just pack it away and bring it out,

734
00:37:23,400 --> 00:37:25,200
Speaker 12: you know, when the season is right.

735
00:37:26,080 --> 00:37:28,239
Speaker 3: All right, Mary, thank you so much for joining us.

736
00:37:28,239 --> 00:37:30,840
Speaker 3: Mary Ross Gilbert, she's a senior equity analysts covering the

737
00:37:30,840 --> 00:37:34,359
Speaker 3: retail space for Bloomberg Intelligence. To space that Bloomberg's Los

738
00:37:34,400 --> 00:37:36,799
Speaker 3: Angeles office, joining us of via that zoom thing.

739
00:37:37,200 --> 00:37:41,719
Speaker 1: This is the Bloomberg Intelligence podcast available on Apples, Spotify,

740
00:37:41,920 --> 00:37:44,839
Speaker 1: and anywhere else you will get your podcasts. Listen live

741
00:37:44,920 --> 00:37:48,520
Speaker 1: each weekday, ten am to noon Eastern on Bloomberg dot com,

742
00:37:48,640 --> 00:37:52,040
Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.

743
00:37:52,160 --> 00:37:55,200
Speaker 1: You can also watch us live every weekday on YouTube

744
00:37:55,400 --> 00:37:57,240
Speaker 1: and always on the Bloomberg terminal