WEBVTT - Earnings, Mergers, Buy American, and Formula 1 0:00:00.840 --> 0:00:04.000 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside 0:00:04.080 --> 0:00:05.240 my co host Matt Miller. 0:00:05.640 --> 0:00:09.600 Every business day we bring you interviews from CEOs, market pros, 0:00:09.720 --> 0:00:13.600 and Bloomberg experts, along with essential market moving news. 0:00:14.160 --> 0:00:17.279 Find the Bloomberg Markets Podcast on Apple Podcasts or wherever 0:00:17.360 --> 0:00:20.000 you listen to podcasts, and at Bloomberg dot com Slash 0:00:20.040 --> 0:00:22.959 podcast To switch skiers and go to the big banks. 0:00:23.200 --> 0:00:26.639 Allison Williams Bloomberg Intelligence. She's been founding these big banks 0:00:26.640 --> 0:00:28.960 for a long time. She's got an informed opinion. So, Allison, 0:00:29.000 --> 0:00:32.360 we've heard from some of the big ones here, what's 0:00:32.479 --> 0:00:34.720 kind of the takeaway? I mean, I know business trends 0:00:35.080 --> 0:00:38.240 are tough there from investment banking and so on and 0:00:38.280 --> 0:00:40.960 so forth, but is trading enough and is wealth management 0:00:41.080 --> 0:00:43.720 enough to get these big firms through to better capital 0:00:43.760 --> 0:00:44.320 markets days? 0:00:45.720 --> 0:00:50.080 So it was a software quarter for the investment bank, 0:00:50.320 --> 0:00:53.360 but fick with a highlight. It actually came in about 0:00:53.440 --> 0:00:57.440 stable with a year ago equities trading down about twelve 0:00:57.440 --> 0:01:00.520 percent across the US banks, and then these coming in 0:01:00.840 --> 0:01:04.160 down twenty to twenty five percent, which actually was a 0:01:04.160 --> 0:01:06.880 little bit better than feared and certainly better than you know, 0:01:06.920 --> 0:01:10.400 the almost fifty percent decline that we saw last year. 0:01:10.600 --> 0:01:14.399 I would say going forward, you know, the pipelines are 0:01:14.600 --> 0:01:17.480 still healthy. We've been hearing that for several quarters now, 0:01:17.560 --> 0:01:19.640 and more and more of the banks are talking about 0:01:20.760 --> 0:01:26.040 a hope for the second half and twenty twenty four. Certainly, 0:01:27.120 --> 0:01:31.440 you know, clarity is what's needed to execute these deals. 0:01:31.200 --> 0:01:35.039 That the curve is pricing in some FED cuts towards 0:01:35.040 --> 0:01:36.800 the end of the year, and I think that has 0:01:36.840 --> 0:01:39.080 been something that the banks are looking for as a 0:01:39.120 --> 0:01:43.200 catalyst for that activity. For banks, you know that the 0:01:43.240 --> 0:01:47.640 outperforming banks in terms of returns and revenue growth were 0:01:47.640 --> 0:01:51.160 really those more focused on lending, so Wells Fargo, Japon, Morgan, 0:01:51.800 --> 0:01:55.400 Bank America, and City. I would say that these four 0:01:55.440 --> 0:01:59.360 banks plus all of the regional banks, you know, the 0:01:59.680 --> 0:02:03.120 one thing we heard the universally deposits they're down, and 0:02:03.840 --> 0:02:07.120 the net interest income outlook is worsening because the costs 0:02:07.800 --> 0:02:10.680 of those deposits are rising. We did see some some 0:02:11.639 --> 0:02:13.040 terms of do you. 0:02:13.000 --> 0:02:16.640 Think a little too ironic? Yeah, I really do think 0:02:17.160 --> 0:02:21.320 it's for years I was interviewing bank CEO's Allison, who 0:02:21.320 --> 0:02:23.160 were like, we can't make any money in this low 0:02:23.200 --> 0:02:25.200 interest rate environment, there's no way for us to make 0:02:25.280 --> 0:02:30.720 net interest margin with zero rates. And now that the 0:02:30.880 --> 0:02:33.200 head and other central banks have been like, okay, you know, 0:02:33.240 --> 0:02:35.560 here's five hundred bases points have increased rates, They're like, 0:02:35.800 --> 0:02:38.440 we can't make any money in these high interest rate environments. 0:02:38.520 --> 0:02:40.760 I reget that they just move too quickly for them, 0:02:40.800 --> 0:02:43.720 But how does it look, you know, going out two 0:02:43.800 --> 0:02:46.320 or three quarters? Are they gonna are they gonna be 0:02:46.400 --> 0:02:48.520 raking in the net interest margin by Q four? 0:02:49.440 --> 0:02:52.240 I mean, so keep in mind that it's all about 0:02:52.440 --> 0:02:55.400 sort of you know, the expectations and where we are. Right. 0:02:55.480 --> 0:02:58.480 So net interest income was up, I mean it's almost 0:02:58.600 --> 0:03:00.680 up fifty percent of JP Moore. Again, it was up 0:03:00.680 --> 0:03:04.720 to you know, forty five percent almost at Wells Fargo, 0:03:04.760 --> 0:03:07.320 twenty three to twenty five percent of our city group. 0:03:07.440 --> 0:03:11.000 So the net interest income growth is really strong, and 0:03:11.040 --> 0:03:13.919 so it is contributing turnings growth. It's just that, you know, 0:03:14.360 --> 0:03:18.480 investors are looking for the peak, and so I we 0:03:19.360 --> 0:03:21.720 it was four Q perhaps for some banks, it might 0:03:21.760 --> 0:03:24.640 be one que for others. And so it's not that 0:03:24.680 --> 0:03:29.959 they're not making money, it's just that that the lift, right, 0:03:30.000 --> 0:03:32.120 So they got the lift on the on the on 0:03:32.240 --> 0:03:37.360 the prices of their loans, but now the prices of 0:03:37.400 --> 0:03:39.720 the deposits, so they're you know, cost of goods sold, 0:03:39.760 --> 0:03:42.480 if you will, is finally starting to catch up. And 0:03:42.520 --> 0:03:44.960 so that's that's and that's coming in a little bit 0:03:45.000 --> 0:03:47.880 faster than people had anticipated. So you know, it's all 0:03:47.880 --> 0:03:51.960 about the expectations. So they are still making snipping an 0:03:51.960 --> 0:03:54.480 amount of money. Again, commercial real estate, that's the big 0:03:54.520 --> 0:03:58.360 thing we're focusing on. Everyone's focusing on credit. Credit is 0:03:58.480 --> 0:04:03.400 still really solid. It's weakening at the margin. Commercial real estate, 0:04:03.600 --> 0:04:08.560 you know, is very early innings, but in general, you know, 0:04:08.640 --> 0:04:11.320 the returns this quarter were still pretty good. 0:04:11.960 --> 0:04:14.600 Head Count, Allison, I mean, when you talk about some 0:04:14.600 --> 0:04:16.520 some weakness in these businesses, that seems to be the 0:04:16.560 --> 0:04:19.479 first place where these big banks can go to can 0:04:19.640 --> 0:04:22.760 reduce expenses. What are they saying about headcount going forward? 0:04:24.120 --> 0:04:27.960 So starting to hear definitely on the investment banking side 0:04:28.000 --> 0:04:30.960 of things, you know, pockets of cuts. As I said 0:04:31.000 --> 0:04:33.080 that the pipelines have been there for a while, and 0:04:33.120 --> 0:04:36.120 there really weren't reductions last year because the banks keep 0:04:36.160 --> 0:04:38.760 holding out hope that that revenue is coming back. But 0:04:38.800 --> 0:04:43.719 we are starting to see some some reductions. We're also hearing, 0:04:43.920 --> 0:04:47.600 you know, more broadly so Goldman had had made some 0:04:47.680 --> 0:04:49.919 pretty sizable cuts, as we know at the very beginning 0:04:49.960 --> 0:04:53.000 of the year. They're making cuts in their consumer bank. 0:04:53.960 --> 0:04:56.279 You know, Bank of America is actually talking about hiring 0:04:56.279 --> 0:04:59.000 people this year, but then things you know, topping out 0:04:59.040 --> 0:05:03.320 after that, and to some extent it is you know, 0:05:03.880 --> 0:05:07.280 sort of the attrition is also slowing because it's just 0:05:07.800 --> 0:05:09.960 not the same job market that it was a year ago. 0:05:10.480 --> 0:05:13.640 Yep, absolutely, all right, Alison, thanks so much for jumping 0:05:13.640 --> 0:05:15.839 on with us. We appreciate it. And it's busy time 0:05:16.520 --> 0:05:18.960 of the quarterview with the banks reporting here, they tend 0:05:18.960 --> 0:05:20.840 to be one of the first groups out of the gate. 0:05:21.120 --> 0:05:23.960 Allison Williams, she's a senior bank's analyst for Bloomberg Intelligence. 0:05:23.960 --> 0:05:27.120 She's based in our Princeton University office. And again, I 0:05:27.160 --> 0:05:28.839 think what we've heard from a lot of the banks, 0:05:28.880 --> 0:05:31.320 the big banks as well as the regional banks is 0:05:31.360 --> 0:05:34.280 the business is okay at the moment, and they are 0:05:34.800 --> 0:05:37.480 cautiously optimistic. But you know, I think i'd probably double 0:05:37.560 --> 0:05:41.360 underscore cautiously at this point when we hear from those 0:05:41.360 --> 0:05:44.520 bank management teams S and p. Five hundred. I'm gonna 0:05:44.560 --> 0:05:47.000 say it for Lisa Bromwins. It is unched on the day. 0:05:47.040 --> 0:05:49.240 Literally nothing going on out there in the SMP. But 0:05:49.240 --> 0:05:51.599 that's okay. It's a Friday yet, Yeah, because we've got 0:05:51.640 --> 0:05:54.280 options expiring at one pm Wall Street time. 0:05:55.720 --> 0:05:59.120 You're listening to the team Ken's are Live program Bloomberg 0:05:59.200 --> 0:06:02.719 Markets at ten am Eastern on Bloomberg dot Com, the 0:06:02.800 --> 0:06:05.919 iHeartRadio app and the Bloomberg Business app, or listen on 0:06:06.000 --> 0:06:07.960 demand wherever you get your podcasts. 0:06:10.320 --> 0:06:12.680 Our next guest has perspective, let me put it that way. 0:06:13.400 --> 0:06:18.279 Very very expansive, resume, very impressive, and we need perspective 0:06:18.320 --> 0:06:20.680 in a big way here. Nancy Tangler joins us. She's 0:06:20.720 --> 0:06:23.680 a CIO of Laffer Tangler Investments. 0:06:24.240 --> 0:06:24.560 Gets this. 0:06:24.640 --> 0:06:28.720 She splits her time map between Lake Tahoe and Scottsdale. We, 0:06:29.080 --> 0:06:31.440 I mean, figured it out completely. Nancy, thanks so much 0:06:31.440 --> 0:06:33.840 for joining us here. We appreciate it coming to New 0:06:33.920 --> 0:06:35.560 York City to. 0:06:35.480 --> 0:06:40.280 The Loma Point Loma University. Yeah, I know where Point 0:06:40.320 --> 0:06:40.960 Loma is. 0:06:41.240 --> 0:06:42.080 How good is that? 0:06:42.080 --> 0:06:45.359 That's another great time. Geographically, You've done very. 0:06:45.200 --> 0:06:48.239 Fun, very well, and we're stuck here in midtown East 0:06:48.480 --> 0:06:50.719 I don't know how that works, all right, Nancy, You've 0:06:50.720 --> 0:06:54.640 seen these markets over cycles, over long periods of time. Here, 0:06:54.920 --> 0:06:57.120 we've just come out of a pandemic. We had some 0:06:57.279 --> 0:07:01.640 crazy fiscal stimulus. Now to stry to pull that stimulus away. 0:07:02.200 --> 0:07:05.479 The FED has raised rates at an unprecedented level over 0:07:05.520 --> 0:07:09.240 the past four quarters. How you guys kind of positioned 0:07:09.320 --> 0:07:11.760 yourself for this environment right here. 0:07:12.120 --> 0:07:16.640 Yeah, So I've been pretty critical of Washington and the FED. 0:07:17.640 --> 0:07:19.480 You know, I wrote a piece in July of twenty 0:07:19.520 --> 0:07:22.920 twenty one that was entitled mister Magoo's Washington, and that 0:07:23.080 --> 0:07:24.760 is what they remind me of. They kind of walk 0:07:24.840 --> 0:07:27.280 along and there's destruction all around them, and somehow they 0:07:27.360 --> 0:07:31.160 come out of it clean. But I think if the 0:07:31.280 --> 0:07:33.640 last well, first of all, I wish the FED Reserve 0:07:33.680 --> 0:07:35.120 Board governors would stop talking. 0:07:35.880 --> 0:07:38.120 And yeah, they talk way too much all the time, 0:07:38.240 --> 0:07:40.560 so many of them. I almost wonder they get paid 0:07:40.600 --> 0:07:43.600 for each speaking engagement because why. 0:07:43.360 --> 0:07:46.360 I don't know, but I think a little mystique would 0:07:46.400 --> 0:07:48.960 go a long way. And the last press conference was 0:07:49.080 --> 0:07:53.160 very disappointing because the FED chair was asked, do you 0:07:53.160 --> 0:07:57.280 think monetary fiscal policy is too much? Should we could 0:07:57.400 --> 0:08:00.760 can you say something and he refuses to even correlation 0:08:01.240 --> 0:08:02.280 between the spending. 0:08:02.520 --> 0:08:06.080 And you'd missed Alan Greenspan, right. 0:08:06.040 --> 0:08:07.520 I know, I miss his briefcase. 0:08:07.880 --> 0:08:12.600 I miss his I miss his testimony because he would 0:08:12.680 --> 0:08:15.920 freely comment on fiscal policy. And why wouldn't you, I mean, 0:08:15.960 --> 0:08:20.000 it's such an important component, right, and Vulker. 0:08:19.680 --> 0:08:21.920 Did, Yeah, you weren't born yet, so you wouldn't know. 0:08:22.000 --> 0:08:23.800 Oh that's so kind of you, so kind. 0:08:24.000 --> 0:08:24.240 Yeah. 0:08:24.240 --> 0:08:25.760 So what we've been doing is, first of all, we 0:08:25.760 --> 0:08:28.160 moved our clients out of bonds in the summer of 0:08:28.160 --> 0:08:30.840 twenty twenty when the ten year hit fifty bases point yield, 0:08:31.240 --> 0:08:33.720 and then we've been moving them back in recently and 0:08:34.360 --> 0:08:37.600 began adding risk back into our equity portfolios, though it 0:08:37.679 --> 0:08:42.400 sounds counterintuitive last fall. So that was Technology and consumer discretionary, 0:08:42.440 --> 0:08:44.240 and those are names that we still like, but we've 0:08:44.240 --> 0:08:46.880 been trimming them because they've they've appreciated so much, and 0:08:46.920 --> 0:08:49.800 we're looking for companies that are Our investing theme is 0:08:49.840 --> 0:08:54.400 old economy companies that are embracing the digital revolution think McDonald's, Chipotle, 0:08:55.080 --> 0:08:59.720 Public Storage, and then the suppliers of the digital solutions. 0:09:00.440 --> 0:09:04.199 So what are some of the names that. You know, again, 0:09:04.360 --> 0:09:06.720 we have a FED that's kind of at or close 0:09:06.760 --> 0:09:10.079 to peaking on rates, you know, so maybe some of 0:09:10.120 --> 0:09:12.320 that headwind for some of the tech and consumer names 0:09:12.640 --> 0:09:13.800 is kind of abating a little bit. 0:09:13.840 --> 0:09:17.480 Let's go public storage because McDonald's and Chipotle, Paul and 0:09:17.559 --> 0:09:21.560 I are intimately familiar with public storage. We don't know so, well, 0:09:22.120 --> 0:09:23.920 why do you like them? What's that company about? 0:09:24.160 --> 0:09:29.360 So they're engaging over fifty percent of their new clients digitally, 0:09:29.480 --> 0:09:33.080 so they never meet with an individual, They access their 0:09:33.120 --> 0:09:37.600 storage locker digitally, and so they've really levered up on 0:09:37.679 --> 0:09:41.160 productivity at the company and they've they paid a special 0:09:41.160 --> 0:09:43.720 dividend last year of thirteen dollars a share, and they 0:09:43.840 --> 0:09:46.560 raised the dividends. So we dislike it for a steady, 0:09:46.640 --> 0:09:49.640 stable earner in the portfolio to complement some of the 0:09:49.760 --> 0:09:51.320 riskier names that we have in there. 0:09:51.520 --> 0:09:56.800 And you have you have Microsoft as well? Or do 0:09:56.840 --> 0:10:01.880 you like Microsoft? Because lately every company that has a 0:10:01.920 --> 0:10:05.880 difficult earnings report just has to mention AI to try 0:10:05.920 --> 0:10:08.480 and get back in. But Microsoft's been at this game 0:10:08.520 --> 0:10:10.480 for longer than you know. 0:10:10.679 --> 0:10:13.720 Tsmc Well, we trimmed it, I mean because we bought 0:10:13.760 --> 0:10:15.560 more last fall, and it was one of our largest 0:10:15.559 --> 0:10:19.120 holdings across all of our strategies. But it went well 0:10:19.160 --> 0:10:21.720 above our guidelines. So we've pulled back on weakness. We'd 0:10:21.720 --> 0:10:22.360 be adding to it. 0:10:22.400 --> 0:10:28.560 That's all those big giant megatech companies, Amazon, Microsoft, Oracle 0:10:28.640 --> 0:10:31.560 you held right, So are those companies that you've taken profits. 0:10:32.080 --> 0:10:35.680 We've only taken profits so far in Salesforce and in 0:10:35.760 --> 0:10:40.480 Microsoft this round. But historically, you know, we've been at 0:10:40.480 --> 0:10:42.520 this for a long time. We were buyers of Apple 0:10:42.800 --> 0:10:45.839 in twenty thirteen, and so we've been a net seller 0:10:45.880 --> 0:10:47.760 of that stock for a long time, and we have 0:10:47.960 --> 0:10:51.040 it represents about three percent of our portfolio. The others 0:10:51.080 --> 0:10:53.120 are much larger portion of it. But yeah, I think 0:10:53.120 --> 0:10:55.440 now is a really interesting time to look at Amazon. 0:10:55.480 --> 0:10:59.319 I thought Andy Jasse's shareholder letter was excellent. I think 0:10:59.360 --> 0:11:03.560 he's being Tim Cooked, which was you know, everyone doubted 0:11:03.600 --> 0:11:05.440 Tim Cook at Apple, and that's when you got it 0:11:05.480 --> 0:11:08.080 once in a lifetime opportunity to buy it at nine 0:11:08.120 --> 0:11:08.840 times earnings. 0:11:08.960 --> 0:11:10.560 You know you mentioned one of your names buying on 0:11:10.600 --> 0:11:12.960 weakness is a name that's been in the news a lot, 0:11:13.040 --> 0:11:16.560 and that's Tesla. Yeah, I guess you had the stomach 0:11:16.600 --> 0:11:19.959 to you know, deal with Elon Musk. What's your tesla 0:11:20.080 --> 0:11:20.439 call here? 0:11:20.920 --> 0:11:23.120 So we're going to be adding to it. I think, 0:11:23.200 --> 0:11:27.600 you know, the margin decline is meaningful, but he still 0:11:27.600 --> 0:11:31.680 has margins that are twice GM and three or four 0:11:31.720 --> 0:11:36.199 times FORD. What I think is important about Elon Musk 0:11:36.280 --> 0:11:39.640 is that he seems to be always going where the 0:11:39.640 --> 0:11:42.199 puck is going, not where it's been. And so the 0:11:42.559 --> 0:11:45.400 price kept cutting, and then today he announced price increases. 0:11:45.840 --> 0:11:49.320 That's going to drive people to the ecosystem, and I think, 0:11:49.520 --> 0:11:52.640 much like Apple, that's a really smart strategy. So he 0:11:52.679 --> 0:11:55.960 doesn't mind being underestimated. I think I owned it once 0:11:56.000 --> 0:11:58.480 and sold it because that was when he was on 0:11:58.520 --> 0:12:01.040 the Joe Rogan podcast smoking. 0:12:00.720 --> 0:12:03.400 Smoking weed, Yeah yesterday. It was four twenty so a 0:12:03.440 --> 0:12:05.480 lot of people were smoking yeah. 0:12:05.520 --> 0:12:07.920 And I sold it because you know, he had his 0:12:08.040 --> 0:12:10.440 top management team turned over a number of times. He 0:12:10.440 --> 0:12:12.880 had that sec problem. And it went up four or 0:12:12.880 --> 0:12:15.200 five fold from there. So when we got an opportunity 0:12:15.200 --> 0:12:17.800 in January to buy it back on a relative price 0:12:17.840 --> 0:12:20.240 to sales ratio it's still attractive, we stepped in. 0:12:20.400 --> 0:12:23.280 And it's also interesting that he's doing I mean, essentially 0:12:23.480 --> 0:12:26.440 you see GM and Ford and all the other legacy 0:12:26.480 --> 0:12:30.600 automakers raising prices on their you know, very expensive products, right, 0:12:30.720 --> 0:12:33.760 high margin products, and then doing everything they can to 0:12:33.800 --> 0:12:36.600 cut prices on their lower end products. And that's certainly 0:12:36.600 --> 0:12:38.840 what Musk is doing as well. But since it's all electric, 0:12:38.880 --> 0:12:41.800 people don't differentiate this much. Right, He's raising prices on 0:12:41.800 --> 0:12:44.600 the one hundred and thirty thousand dollars SUV while he's 0:12:44.640 --> 0:12:50.160 cutting prices on the forty five thousand dollars you know Sedan. 0:12:50.320 --> 0:12:51.240 So it just makes this. 0:12:52.400 --> 0:12:56.319 Yeah, it's kind of the LVMH of the auto industry, and. 0:12:56.280 --> 0:12:58.959 It gets that kind of valuation. And I mean it did, right. 0:12:59.040 --> 0:13:01.240 It was at four hundred, now it's at one sixty. Yeah, 0:13:01.240 --> 0:13:02.160 so I guess this is the right time. 0:13:02.200 --> 0:13:04.080 We've picked it off in at like one oh four, 0:13:04.120 --> 0:13:07.600 but we didn't buy enough. That's that's the perpetual dissatisfaction 0:13:07.640 --> 0:13:09.280 of being a portfolio manager. 0:13:09.559 --> 0:13:11.880 All right, Nancy, next time, anytime you're in New York, 0:13:12.040 --> 0:13:13.679 you need to stop buy because but you're gonna be 0:13:13.720 --> 0:13:15.600 in Tahoe in Scottsdale. I'll put You're not in New 0:13:15.640 --> 0:13:16.319 York very often. 0:13:16.400 --> 0:13:16.600 I am. 0:13:16.679 --> 0:13:18.520 I'm here every month Okay, well come. 0:13:18.440 --> 0:13:19.880 Back, let us know when you're coming back on week 0:13:19.920 --> 0:13:21.560 you here, we'll talk some more stocks and more names. 0:13:21.679 --> 0:13:24.120 I want to talk you about being a senior woman 0:13:24.120 --> 0:13:26.320 in a financial services industry. I know you're the author 0:13:26.320 --> 0:13:29.120 of the book The Woman's Guide to Successful Investing in 0:13:29.200 --> 0:13:31.480 your working on a second edition. Now we want to 0:13:31.480 --> 0:13:33.280 get you to talk to you a little bit about 0:13:33.320 --> 0:13:36.360 that because, as you know, you are somewhat unique in 0:13:36.360 --> 0:13:38.760 the financial services industry, and we appreciate. 0:13:38.440 --> 0:13:41.480 That you're listening to the tape. Cat's are live program 0:13:41.520 --> 0:13:45.480 Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio, 0:13:45.640 --> 0:13:48.360 the tune in app, Bloomberg dot Com, and the Bloomberg 0:13:48.400 --> 0:13:51.480 Business App. You can also listen live on Amazon Alexa 0:13:51.559 --> 0:13:54.840 from our flagship New York station, Just say Alexa play 0:13:54.960 --> 0:13:56.960 Bloomberg eleven thirty. 0:13:58.320 --> 0:14:01.760 Deb Bacon, she covers the detailers for Bloomberg Intelligence, is 0:14:01.840 --> 0:14:03.760 based in London. So we're going to talk to her 0:14:03.760 --> 0:14:06.120 about Procter and Gamble because she covers Procter and Gamble. 0:14:06.600 --> 0:14:09.240 But then I'm moving on very quickly to luxury because 0:14:09.600 --> 0:14:11.959 Deb is my go to voice, as she is for 0:14:12.080 --> 0:14:15.920 many institutional investors on the luxury business. But deb let's 0:14:15.960 --> 0:14:18.120 pay the bills here. Let's start with Procter and Gamble. 0:14:18.160 --> 0:14:20.160 The stocks up three point eight percent. It doesn't sound 0:14:20.160 --> 0:14:22.160 like a lot, but that's like the the stock never 0:14:22.240 --> 0:14:25.080 moves that much. So they had some good numbers. Tell 0:14:25.160 --> 0:14:27.840 us what happened, right? 0:14:27.920 --> 0:14:30.680 I think you know, I looked at these numbers and 0:14:31.720 --> 0:14:35.800 the market was already expecting decent sales growth, so there 0:14:35.840 --> 0:14:40.000 was a little beat on sales. But the big thing 0:14:40.040 --> 0:14:43.160 here is the amount of growth margin that they're accumulating. 0:14:43.680 --> 0:14:46.040 And when we think that we're going to see costs 0:14:46.080 --> 0:14:50.720 start to fall away and also for X headwinds start 0:14:50.760 --> 0:14:54.440 to transition over the coming quarters, that votes really well 0:14:54.480 --> 0:14:57.560 for the level of productivity that's there. They're volumes are 0:14:57.560 --> 0:14:59.480 down three percent, but that's kind of in line with 0:14:59.560 --> 0:15:03.240 the market. So they're holding market share by value and volume. 0:15:03.360 --> 0:15:07.400 They're investing heavily in marketing spend, and it really bodes 0:15:07.440 --> 0:15:10.480 well for where their position going into next fiscal year. 0:15:10.960 --> 0:15:14.440 What are the four X headwind transitions you're expecting? What 0:15:14.440 --> 0:15:15.160 are we looking for? 0:15:16.160 --> 0:15:19.080 So the company expects five percent by year end for 0:15:19.200 --> 0:15:24.160 fiscal twenty twenty three, and this quarter we're already starting 0:15:24.200 --> 0:15:26.000 to see that come off. So it was one half 0:15:26.040 --> 0:15:29.040 way to this is their fiscal Q three pardon. 0:15:28.760 --> 0:15:30.560 Me, five percent of five percent of. 0:15:30.520 --> 0:15:35.320 What sorry, so on five percent of sales. So at 0:15:35.360 --> 0:15:38.400 the top line for fiscal twenty twenty three, you're going 0:15:38.440 --> 0:15:41.520 to see all in net sales, not one percent, because 0:15:41.560 --> 0:15:44.480 there's going to be about a five percent for X 0:15:44.560 --> 0:15:48.960 headwind fiscal twenty twenty three. But as as we've seen 0:15:49.560 --> 0:15:53.200 through the coming quarters, we see four percent for X 0:15:53.280 --> 0:15:56.200 headwind in the last Q three and that should go 0:15:56.320 --> 0:15:59.160 down some more in Q four, So bit by bit 0:15:59.240 --> 0:16:02.680 into next year, we'll see that headwind turn into tailwind. 0:16:03.160 --> 0:16:05.360 And at the same time we've seen peak. Of course, 0:16:05.440 --> 0:16:08.200 we'll start to see some of those coming off, and 0:16:08.240 --> 0:16:10.960 that just really puts them in good positions for next year. 0:16:11.480 --> 0:16:13.400 All right, deb, Matt Miller is more of a you know, 0:16:13.880 --> 0:16:16.440 practer and gamble guy. I'm more of a luxury goods guy. 0:16:16.720 --> 0:16:18.520 So talk to us about what's going on in the 0:16:18.560 --> 0:16:21.520 luxury good business. I know you follow all of those names. 0:16:22.080 --> 0:16:23.720 I want to get it from the angle of China 0:16:23.760 --> 0:16:26.480 reopening because you know everything I know about the luxury 0:16:26.480 --> 0:16:29.840 good business I learned by reading your research. But China's reopening, 0:16:29.880 --> 0:16:33.040 that's going to be a really big tailwind. When will 0:16:33.080 --> 0:16:35.320 some of the luxury good companies start to see that? 0:16:36.760 --> 0:16:38.680 I mean in terms of share price, we're seeing that 0:16:38.760 --> 0:16:42.080 already right, some of the big So it was announced 0:16:42.160 --> 0:16:46.360 eight to January that that China would do a big reopening, 0:16:46.560 --> 0:16:49.600 a very big surprise, and already we start to see 0:16:49.640 --> 0:16:52.440 share price momentum on the back of that. So we've 0:16:52.480 --> 0:16:56.080 seen the likes of Air Mayres or Brunelo, Kushinelli up 0:16:56.120 --> 0:16:59.120 over thirty percent year today. So these companies are already 0:16:59.160 --> 0:17:02.360 swung quite well through second half of twenty twenty two, 0:17:03.640 --> 0:17:06.960 and then for the sector overall, it's becoming an outperformer. 0:17:07.359 --> 0:17:10.720 And what we saw was January was still very difficult 0:17:10.880 --> 0:17:14.199 because people were hesitant to get back in in the marketplace, 0:17:14.520 --> 0:17:18.240 product not in the right place. By February, these companies 0:17:18.240 --> 0:17:22.760 are saying that we're seeing traveling, we're seeing spending in stores, 0:17:22.920 --> 0:17:26.320 a return into the market, but still a drag for 0:17:26.480 --> 0:17:29.840 China overall in the Asia through the Q one into 0:17:29.920 --> 0:17:32.119 Q two, though we would expect if there are no 0:17:32.200 --> 0:17:35.840 big adversaries, that we see double digit growth starting to 0:17:35.880 --> 0:17:38.720 pick up through Q two year on year and through 0:17:38.760 --> 0:17:40.359 the rest of twenty twenty three. 0:17:41.680 --> 0:17:45.159 Talk to us about just the supply chain for some 0:17:45.160 --> 0:17:48.480 of these luxury retailers. I mean, where do they source 0:17:48.520 --> 0:17:51.320 their product? Has it been a problem, is it getting better? 0:17:51.520 --> 0:17:54.760 So on the on the supply chain side, right. 0:17:54.720 --> 0:18:00.000 So if we think about the heritage companies like ms 0:18:00.119 --> 0:18:08.200 like LVMH, the Italian traditional luxury makers, everything's produced locally 0:18:08.720 --> 0:18:11.960 so as in so I need to rephrase that everything 0:18:12.080 --> 0:18:15.720 is produced out of Europe, so France, Italy and others. 0:18:16.320 --> 0:18:20.680 So their supply chain is particularly robust, and in fact 0:18:20.720 --> 0:18:24.160 they're having to probably raise fourty five percent capacity per 0:18:24.240 --> 0:18:27.760 year just to manage that double digit growth because they 0:18:28.920 --> 0:18:32.080 have had such an explosion that some of these companies 0:18:32.080 --> 0:18:36.560 have doubled their sales versus twenty eighteen, So they're fully 0:18:37.160 --> 0:18:42.399 compensated twenty nineteen, twenty twenty and through the lockdown and 0:18:42.440 --> 0:18:44.399 they're out at the other end, and they're bigger and 0:18:44.440 --> 0:18:47.840 stronger than ever. So they're having to build production and 0:18:47.880 --> 0:18:51.640 build supply chain around that. The big move also has 0:18:51.680 --> 0:18:54.560 been that pre COVID we saw only around forty five 0:18:54.600 --> 0:18:58.320 percent of sales online and now that's very much more 0:18:58.359 --> 0:19:01.520 than doubled, and in the teams many makers, and they're 0:19:01.560 --> 0:19:04.600 working with big you know, some of the best in 0:19:04.720 --> 0:19:09.359 class in terms of of partners out there like Farfex, 0:19:09.520 --> 0:19:15.560 Alibaba Luxury Portals to really do things also online. So 0:19:15.600 --> 0:19:21.239 they're marketing to more clients baskets of bigger size, and 0:19:21.320 --> 0:19:24.119 also they're getting a younger generation on board more quickly. 0:19:24.640 --> 0:19:27.560 So DEBI, I look at you know, the shares of 0:19:27.800 --> 0:19:32.520 hermez or ames up thirty eight percent this year fifty 0:19:32.520 --> 0:19:35.480 two week high, up sixty percent on a trailing twelve 0:19:35.480 --> 0:19:38.840 month basis. Have I missed that luxury trade? 0:19:40.000 --> 0:19:42.560 You're going to be buying it for forty eight times 0:19:42.640 --> 0:19:46.119 next year's pe. But I've had so much interest in 0:19:46.119 --> 0:19:49.399 this stock over the week because the idea here is 0:19:49.440 --> 0:19:53.640 that you know, there are only three hundred stores worldwide. 0:19:54.160 --> 0:19:58.359 The company will opened two new production sites for leather 0:19:58.400 --> 0:20:02.439 goods this shure. They have another production site coming on 0:20:02.520 --> 0:20:06.960 board every year to twenty twenty seven, and so that's 0:20:06.960 --> 0:20:10.720 how they're fulfilling their growth. They have waiting lists longer 0:20:10.760 --> 0:20:14.280 than some of the watch companies, and yet they're also 0:20:14.560 --> 0:20:20.600 using their one single individual brands to transition into very 0:20:20.720 --> 0:20:25.399 sizable and weighty sectors. They're doing very well and ready 0:20:25.440 --> 0:20:29.520 to wear of course into others, into jewelry, into homeware, 0:20:29.880 --> 0:20:30.800 homewhere is that right? 0:20:30.880 --> 0:20:33.000 There's plenty of stuff, plenty of stuff for me to 0:20:34.119 --> 0:20:37.280 spend on Debacon. She's a senior anas covering luxury goods 0:20:37.680 --> 0:20:41.600 for Bloomberg Intelligence out of London, talking about the practer 0:20:41.680 --> 0:20:45.080 and gamble numbers very strong, talking about luxury, which means 0:20:45.280 --> 0:20:47.720 very strong. These stacks have been on an absolute terror 0:20:47.760 --> 0:20:50.080 in part due to a China reopening. 0:20:51.480 --> 0:20:55.320 You're listening to the Team Cancer Live program Bloomberg Markets 0:20:55.359 --> 0:20:58.439 weekdays at ten am Eastern on Bloomberg dot Com, the 0:20:58.520 --> 0:21:02.520 iHeartRadio app Berg Business Happen or listen on demand wherever 0:21:02.560 --> 0:21:03.720 you get your podcasts. 0:21:05.440 --> 0:21:07.840 John Tucker, thank you so much. We appreciate that. Now 0:21:07.840 --> 0:21:10.480 I kind of forgot about this deal. But it's a 0:21:10.480 --> 0:21:14.720 big one. Kroger Albertson's the supermarket chained twenty five billion 0:21:14.760 --> 0:21:18.040 dollar merger. It is winding its way through the regulatory process. 0:21:18.040 --> 0:21:20.040