Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Speaker 1: Eastern on Apple Car playing Android Auto with the Bloomberg
Speaker 1: Business App. Listen on demand wherever you get your podcasts,
Speaker 1: or watch us live on YouTube.
Speaker 2: Alex Steele and Paul Sweeney, You're live here in a
Speaker 2: Bloomberger Interactive Brokers studio in sweltering New York City. Are
Speaker 2: also streaming live on YouTube, So head over to YouTube
Speaker 2: dot com search Bloomberg Podcast. A lot of stuff coming out,
Speaker 2: a lot of earnings coming out. We had Eco data today,
Speaker 2: retail sales solid, and on the earnings front, we had
Speaker 2: some of the big investment banks report here, Morgan Stanley
Speaker 2: and Bank of America's Charlie was just reporting stocks at
Speaker 2: fifty two week highs, both of them here today. So
Speaker 2: Allison Williams is going to break it down for She's
Speaker 2: a senior anild. She covers all these big banks for
Speaker 2: Bloomberg Intelligence. She joins us here in our studio. Alison,
Speaker 2: let's start with your former firm, Morgan Stanley. Stocks up
Speaker 2: two and a half percent today, fifty two week high.
Speaker 2: What did the street like here.
Speaker 3: I mean really strong institutional numbers. I mean it was
Speaker 3: a great quarter for trading and investment banking, So equities
Speaker 3: trading really I think a source of strength. Morgan Stanley
Speaker 3: doing better than expected across the board and just really well.
Speaker 3: So equities trading I think was the standout. Fixed income,
Speaker 3: you know, was sort of mixed, but really compared to
Speaker 3: a year ago. I think that's strong that those revenues
Speaker 3: are turning out to be resilient. And on the investment
Speaker 3: banking side, investors are excited that there could be momentum
Speaker 3: coming into the into the next quarter. You know, M
Speaker 3: and A still just historically low, so improving from a
Speaker 3: low base. Same thing with equities, but I think reasons
Speaker 3: for optimism, especially with the stocks in general doing so well.
Speaker 2: Now for Bank of America, when I think a Bank
Speaker 2: of America, I think it a corporate bank, you know,
Speaker 2: making big loans to big corporate customers around the world.
Speaker 3: What did you see there, so, you know, I think
Speaker 3: the demand is for loans is still something that we're
Speaker 3: looking more for the second half. If we do get
Speaker 3: the FED rate cuts, that is definitely going to be
Speaker 3: a help. And I think for Bank of America what
Speaker 3: people are excited about is that it could be the trough.
Speaker 3: So Bank of America saying that it's going to be
Speaker 3: the trough, this will be the weakest quarter. But keep
Speaker 3: in mind that they are baking in the FED rate
Speaker 3: cut expectations and some loan growth in the second half.
Speaker 3: So we'll see if they can deliver that. But definitely
Speaker 3: telling investors what they want to hear today in terms
Speaker 3: of the fourth quarter, a little bit higher entry rate,
Speaker 3: firming that up, and again that the you know, most
Speaker 3: of the weakness could be behind us.
Speaker 4: So does that mean that if we don't get FED
Speaker 4: cuts that were in that Bank of America is going
Speaker 4: to have some problems here.
Speaker 3: I think where the disappointment will come will be loan
Speaker 3: growth spurred by FED cuts. Right, So I think that
Speaker 3: some of the loan growth that they're factoring in is
Speaker 3: based on that we heard from Wells Fargo where they're
Speaker 3: you know, still a lot more cautious on the loan
Speaker 3: growth side. And commercial and industrial has been a weak spot.
Speaker 3: Credit card is has been a strong spot.
Speaker 5: You know.
Speaker 2: When I was in banking, one of our most lucrative
Speaker 2: businesses that the Chase Man had bank was this leverage lending,
Speaker 2: you know, lending to companies that don't have assets or
Speaker 2: inventory and any kind of just lending into cash flow.
Speaker 2: It's a little bit more risky. It's tough to show
Speaker 2: your credit officer where the collateral is for this loan.
Speaker 2: But we made a lot of money doing it's a
Speaker 2: private credit market. How's a private credit market been poaching
Speaker 2: on that business?
Speaker 3: So actually you would have been making this would have
Speaker 3: been a good quarter for you. I know you'd be happy.
Speaker 3: The first quarter was good, second quarter was good. And
Speaker 3: I think that if you look at some of the
Speaker 3: most recent statistics that we've seen, is that banks are
Speaker 3: still doing a lot of that refinancing. Right, So a
Speaker 3: lot of the business that's been happening in the debt markets,
Speaker 3: debt fees, a source of strength across the banks supporter
Speaker 3: has been refinancing, and that leverage lending business has been
Speaker 3: doing well at the bank. So even though private credit
Speaker 3: is certainly raising a lot of funds and a product
Speaker 3: in demand, banks are still getting their share of refinancing
Speaker 3: in their leverage one volumes. And that's you know sort
Speaker 3: of you saw like the huge growth at City Group
Speaker 3: and the numbers at Gold and sachs where they have
Speaker 3: relative strength in those businesses. High yields another area that's
Speaker 3: doing really well.
Speaker 4: Back to the consumer, so we'll have Paul do them
Speaker 4: and banking stuff, all the consumer stuff. What about chargeobs
Speaker 4: on their credit card losses for Bank of America? Was
Speaker 4: that higher lower? Where did that come out in general?
Speaker 3: I would say there, So their provisions overall came in
Speaker 3: in line. We did see, you know, charge offs in
Speaker 3: the car business, charge offs and commercial real estate. So
Speaker 3: those are areas that we're watching, but you know, controlled
Speaker 3: and in line with expectations. I think the area of
Speaker 3: weakness that we saw in card this quarter was at
Speaker 3: City Group. They have a private label business that's it
Speaker 3: tends to skew on the lower income side of things.
Speaker 3: You're seeing losses come in above their targeted range. There
Speaker 3: is a seasonal pattern to that, and so there are
Speaker 3: expectations that that could come in, but I would say
Speaker 3: the second quarter did not give us confidence in those expectations.
Speaker 3: So I think that is continues to be an area
Speaker 3: for watching. It's not necessarily a big area for the
Speaker 3: big banks that we're talking about today and the ones
Speaker 3: that I cover, but I think it's important to watch,
Speaker 3: you know, for the overall economy and to some of
Speaker 3: the other card names such as Synchrony.
Speaker 2: CEO at Morgan Stanley, we have a new CEO, Ted Pick,
Speaker 2: I guess with a little bit of hindsight here does
Speaker 2: it seem like it's kind of working and everybody's kind
Speaker 2: of found their place, and.
Speaker 3: So it seems like, you know, he's talking with conviction.
Speaker 3: I think the boldest statement he made today was with
Speaker 3: regard to the margins and the wealth business. So the
Speaker 3: wealth business, as you know under the former CEO and
Speaker 3: a lot of acquisitions, wealth and asset management is the
Speaker 3: predominant revenue and profit engine. It's what investors are watching.
Speaker 3: The wealth margin was something where Pick early in the
Speaker 3: year took off some of the upside under the prior targets,
Speaker 3: and that thirty percent wealth target, I think is a
Speaker 3: question among investors if they can get there. And Ted
Speaker 3: really trying to instill confidence that he is a believer
Speaker 3: the wealth flows at Morganstone I would say, you know,
Speaker 3: that is the probably the number one thing I think
Speaker 3: that that we watch for them, and that did come
Speaker 3: in week this quarter. The fee based part of those
Speaker 3: flows were relatively resilient, so some puts in takes there,
Speaker 3: but I think the wealth flows do bear watching, and
Speaker 3: that that really has been the engine of optimism investors,
Speaker 3: like you know, the tilt towards the recurring fee based business,
Speaker 3: and so I think that the have to continue to
Speaker 3: deliver and deliver on that thirty percent margin that Pick
Speaker 3: is confident, and.
Speaker 4: Then I'll go to sort of what the macro read
Speaker 4: is from Morgan Stanley because also on the call, Ted
Speaker 4: Pick said that you're going to see normal M and
Speaker 4: A return unless there's a full bown recession, and he
Speaker 4: thinks we're in the early stages of multi year investment
Speaker 4: banking leed cycle.
Speaker 3: Oh yeah, oh yeah, but we've been hearing that for
Speaker 3: so many quarters now and you're starting to definitely, you know,
Speaker 3: feel more of the doubt coming from analysts. Right. So
Speaker 3: the twenty twenty one, amazing twenty twenty two disaster, the
Speaker 3: lift that we got last year did not materialize. I
Speaker 3: would say that so far this year EM and A
Speaker 3: has been disappointing again, and you know you can see
Speaker 3: in terms of the reported fees and the announcements, right,
Speaker 3: so both of those have been disappointing. It does tend
Speaker 3: to pick up late in the year. It does tend
Speaker 3: to pick up after elections, so I think it'll be
Speaker 3: hard to get for that particular business line, you know,
Speaker 3: sort of the momentum people are looking for perhaps until
Speaker 3: after the election. But on the underwriting side, I think
Speaker 3: is where you're seeing, you know, perhaps more of the
Speaker 3: momentum and strength. Goldvinzachs, though who is tends to be
Speaker 3: the biggest and reported revenue, did say significant uptick in
Speaker 3: their pipeline, debt, underwriting and advisory where the areas of strength.
Speaker 6: Right.
Speaker 2: Very good, Allison Williams, Thank you so much. We appreciate that.
Speaker 2: Alsa Williams covers all the big banks for Bloomberg Intelligence.
Speaker 2: Joining us here in our New York studio.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business app. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just Say Alexa, playing Bloomberg eleven thirty.
Speaker 4: Alex Steel alongside Paul Sweened is in Bloomberg Intelligence Radio.
Speaker 4: We bring you all the top news and analysis with
Speaker 4: our great Bloomberg Intelligens analyst team. They cover two thousand
Speaker 4: companies and one hundred and thirty industries worldwide, and occasionally
Speaker 4: we go across the pond and check him with Craig Trudell.
Speaker 4: He's Bloomberg Global Autos Editor and he joins us. Now,
Speaker 4: so many fun things to talk about, but let's just
Speaker 4: start with Tesla for a second, because the news was
Speaker 4: quite staggering. They're going to hire nearly eight hundred new
Speaker 4: employees but didn't. Also they just fire a lot of employees.
Speaker 6: Yeah, this is very Elon Muskian of Tesla in that
Speaker 6: it sort of you know, depends on the day of
Speaker 6: what's going on at this company. So yes, a few
Speaker 6: months back on the heels of Tesla selling about twenty
Speaker 6: percent fewer cars than it did in the fourth quarter,
Speaker 6: Elon Musk wasn't particularly happy with that. With that quarterly showing,
Speaker 6: he wanted the company to cut headcount by a commensurate amount,
Speaker 6: so roughly twenty percent. So you know, for contexts, you know,
Speaker 6: this is a company that you know, had quite a
Speaker 6: few employees at that time. They started the year with
Speaker 6: around one hundred and forty thousand, so that would mean
Speaker 6: twenty eight thousand people being let go. It's unclear whether
Speaker 6: they got to that, but it is absolutely clear that,
Speaker 6: you know, certain parts of the company were decimated, I
Speaker 6: think most notably the super Charging team that really turned
Speaker 6: a lot of heads because it was a you know,
Speaker 6: aspect of this company that has been looked at as
Speaker 6: you know, such a sort of feather in their cap
Speaker 6: that they really you know, invested where others didn't and
Speaker 6: built a charging network that worked whereas others have not
Speaker 6: worked very well, particularly in the US, and so it
Speaker 6: is kind of shocking to see you know, such a
Speaker 6: significant you know pulling of people followed by a you
Speaker 6: know hiring spree of sorts.
Speaker 3: So do we know kind of what type of roles
Speaker 3: they're hiring for. Are they hiring.
Speaker 2: People to bend metal or are they looking to like
Speaker 2: some software guys for AI and all that, the.
Speaker 7: Robotax for the superpower people, the superhero Yeah, I think,
Speaker 7: you know, we we did report even weeks back that
Speaker 7: some of the Supercharger people, who are you know, a
Speaker 7: part of the team that was really uh you know
Speaker 7: cut to a very significant degree, were brought back.
Speaker 6: Relatively quickly, notably the woman who was running that group,
Speaker 6: uh you know, was has not been brought back. Uh,
Speaker 6: and there were some reports that maybe she you know,
Speaker 6: kind of tried to protect her team and what was
Speaker 6: you know, dismissed as a result of that. So, uh,
Speaker 6: you know, in terms of what parts of the company
Speaker 6: are hiring, it's it's it's pretty broad, but I would say,
Speaker 6: you know, the data that our very own Kara Carlson
Speaker 6: has has crunched. Service is a big aspect, which is
Speaker 6: maybe no surprise in that, you know, the summer season
Speaker 6: is a busy one for Tesla. People are out, you know,
Speaker 6: driving for vacations. It's warm outs, they're running their air conditioners,
Speaker 6: you know, to the extent that you do need the
Speaker 6: service and electric vehicle, that's one of the things that
Speaker 6: is common. So, you know, one of the interesting aspects
Speaker 6: of this story is that you know, we we did
Speaker 6: speak with with people who were a part of this
Speaker 6: job job cutting who you know, said that they were
Speaker 6: surprised that some of the service and salespeople, you know,
Speaker 6: that that the company you know, clearly needs at a
Speaker 6: time of you know, busy service work and you know,
Speaker 6: a company that's struggling to to sell more cars. Uh,
Speaker 6: you know, we're seeing you know, some people being brought
Speaker 6: back there, but it is very widespread, I think notably
Speaker 6: as well. Uh, you know, AI and robotics is definitely
Speaker 6: you know, an area where everybody is you know, looking
Speaker 6: at very closely because of you know what this sort
Speaker 6: of new priority is or or emphasis is on the
Speaker 6: part of Musk.
Speaker 5: You know.
Speaker 2: Craig Bloomberg is also out with a story David Welch
Speaker 2: that GM's Mary Barris says the automaker won't sell a
Speaker 2: million evs next year, So just another story, another data
Speaker 2: point about kind of maybe where the ultimate demand or
Speaker 2: lack of demand may be for EV's. What's the latest
Speaker 2: feeling within the industry about how this thing's going to
Speaker 2: evolve at what pace.
Speaker 6: Yeah, we've we've seen a really dramatic pullback on the
Speaker 6: part of GM and Ford in particular. I feel like,
Speaker 6: you know, Stillantis, you know, formerly FIA Chrysler. They were
Speaker 6: sort of slow in the first place, you know, making
Speaker 6: this transition and have you know, not necessarily had much
Speaker 6: to pull back from. But I would not be surprised
Speaker 6: if they sort of you know, joined the quote unquote
Speaker 6: party in terms of you know, maybe dialing back sort
Speaker 6: of the ramp at which they you know, try to
Speaker 6: you know, produce more electric vehicles and sell them. But
Speaker 6: but it is very interesting to see you know, GM
Speaker 6: and Ford you know, really be sort of welcomed with
Speaker 6: open arms by the White House, you know, Mary Bara
Speaker 6: being lauded by Bidens as leading the EV trans that
Speaker 6: really you know, ticked off Elon Musk and helps explain why,
Speaker 6: you know, in the last few days we've learned that
Speaker 6: he's been you know, planning to spend quite a bit
Speaker 6: of money on you know, contributing to to packs to
Speaker 6: get to Donald Trump reelected.
Speaker 4: Well that was my thing is that the Musk Trump
Speaker 4: love affair I find to be quite interesting because if
Speaker 4: we can just game out that the love affair is
Speaker 4: also so President Trump would be more nice to evs,
Speaker 4: is the huge change that we're expecting with alternative energy
Speaker 4: and the IRA and a Trump administration maybe not going
Speaker 4: to happen. I mean, just looked at solar stocks yesterday.
Speaker 4: They got smoked because of it, but Tesla didn't.
Speaker 6: Yeah, it is surprising. I mean maybe if you're trading Tesla,
Speaker 6: you sort of reckon that, you know, the CEO very
Speaker 6: very publicly endearing himself to the candidate will sort of,
Speaker 6: you know, come back to benefit him down the line,
Speaker 6: and maybe some of these threats to do away with
Speaker 6: electric vehicle tax credits and so forth will fall by
Speaker 6: the wayside.
Speaker 1: Uh.
Speaker 6: You know. Elon even went so far, you know, in
Speaker 6: the last day or so to to sort of claim
Speaker 6: that that, you know, doing away with subsidies would only
Speaker 6: help Tesla. I don't know how exactly he squares that circle,
Speaker 6: but perhaps it's a matter of Tesla is you know,
Speaker 6: the strongest of the companies that's trying to make this
Speaker 6: work and is for this along, and so taking subsidies
Speaker 6: away would would hurt you know, competitors even more so
Speaker 6: than it would Tesla. But it certainly wouldn't be good
Speaker 6: for for Tesla to lose access to seventy five hundred
Speaker 6: dollars for a lot of its its customers in the
Speaker 6: US or would be customers. And so, you know, I
Speaker 6: do think it's very interesting and we've we've heard very
Speaker 6: similar sort of intev rhetoric on the on the part
Speaker 6: of jd Vance, his running mate, and so I think
Speaker 6: it's it's not only Trump who's you know, sort of
Speaker 6: campaigned against evs, but but his running made as a yesterday.
Speaker 2: Hey Craig, thanks so much for joining us. Always appreciate
Speaker 2: talking to you. Craig Trudell, He's Global autos editor for
Speaker 2: Bloomberg News, joining us via zoom from our London Queen
Speaker 2: Victoria Street headquarters. How about this, Since April twenty second,
Speaker 2: Tesla stock is up seventy eight percent. Such a move
Speaker 2: had there's such a negative sentiment there for you know,
Speaker 2: four or five quarters here again as the market's trying
Speaker 2: to discount what is the demand I really like for
Speaker 2: evs and going forward, and I think definitely a turn
Speaker 2: around here, So take note of that. Now a big
Speaker 2: marketing cap stock as well.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Affo card playing Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 4: Okay, So the Eco news of the morning was that
Speaker 4: retail sales number coming and better than estimated. So retail
Speaker 4: sales off you back out auto and gas. It was
Speaker 4: about eight tens of one percent in June. That retail
Speaker 4: sales Control group was up nine tenths of one percent. Sure,
Speaker 4: they're like doing it in areas where prices have come down,
Speaker 4: so there's still some price sensitivity to it, but it
Speaker 4: was pretty strong, So we want to get more on
Speaker 4: that with Jill Blindshard, president of Enterprise Client Solutions of
Speaker 4: Advantage Solutions. She joins us now from Chicago, Illinois. What
Speaker 4: did you make on the numbers, Jill, Yeah.
Speaker 8: It's so first of all high and thanks for having
Speaker 8: me back. Boy.
Speaker 9: I am trying to temper predictions, let's say, because consumer
Speaker 9: demand is still a really big concern in the back
Speaker 9: half of this year. A year ago, eighteen percent of
Speaker 9: CFOs said that they were concerned about the effect of
Speaker 9: consumer demand on their business.
Speaker 8: That is now tripled to fifty.
Speaker 9: Four percent, and so prices are up twenty to forty
Speaker 9: percent plus choose your category. In most cases, the wages
Speaker 9: haven't kept that same pace, and so there is a
Speaker 9: big impact on many households across the country. Consumers have
Speaker 9: been notoriously price sensitive even before the pandemic, and that
Speaker 9: waned a bit with cod when they couldn't spend on
Speaker 9: services and they diverted that to goods.
Speaker 8: But now they're both back, and they're back at higher prices.
Speaker 9: And so consumers have to find less expensive alternatives to
Speaker 9: achieve those same outcomes. They're still traveling, they're still eating out,
Speaker 9: but the overall transactional value for those is down. And
Speaker 9: so I'd say I'm trying to temper my predictions for
Speaker 9: the next six months.
Speaker 2: What is upflation?
Speaker 8: I love that, right, so super you know.
Speaker 9: So first of all, I have fallen prey to this,
Speaker 9: and so I'll give you my confession here. Inflation is
Speaker 9: this concept of finding new uses for existing products. So
Speaker 9: think of things like an all over bodied deodorant, cereal
Speaker 9: as an economic option for dinner, frozen vegetables a liua
Speaker 9: fresh vegetables to save on waste.
Speaker 8: How about this ready pickle cupcakes. That's a thing. And
Speaker 8: it's not just the cake, it's the frosting. I've fallen
Speaker 8: prey to dog wipes.
Speaker 9: I don't know how they're different than a regular wipe,
Speaker 9: but I feel better about putting that on her paws.
Speaker 9: Hair sunscreen and TikTokers explain, this is expensive. It's hair sunscreen,
Speaker 9: so you spray it on your on your hair, so
Speaker 9: it doesn't so so the sun doesn't do change it.
Speaker 9: And uh TikTok is riding the social wave. Check out
Speaker 9: the hashtag late night stack. They are virtually creating a
Speaker 9: fourth meal, and manufacturers are eager to ride the that wave.
Speaker 9: So there's a lot of examples of inflation out there
Speaker 9: as manufacturers get really creative and trying to get their
Speaker 9: products into more places.
Speaker 4: I'm I just I don't understand, Like, isn't the point
Speaker 4: like you want the bleachy sun blonde look like people
Speaker 4: pay for that. I don't know what I'm not This
Speaker 4: is gonna get off topic, but I'm gonna do some
Speaker 4: homework on this. I'm gonna do some research. I'm gonna
Speaker 4: talk about my feelings. Okay, So what about these unusual strategies,
Speaker 4: Like are people willing to actually, you know, pay for that?
Speaker 4: How does a traditional retailer just say, guys come to
Speaker 4: my store and buy stuff like basic stuff?
Speaker 6: You know.
Speaker 8: So the word of month I think is creative.
Speaker 9: And so we just heard about a very creative strategy
Speaker 9: from manufacturers and retailers as well as consumers are also
Speaker 9: getting very creative. So retailers are doing the things that
Speaker 9: we've seen before. They're pricing their promotion strategies. You know.
Speaker 9: We'll talk today about some of the significant promotion things
Speaker 9: happening this summer. But let's talk about the unlikely business
Speaker 9: pairings and collaborations that we're seeing across retailers today to
Speaker 9: find new business synergies and drive traffics. So, for example,
Speaker 9: look at Uber joining forces with Instacart and Costco. Coles
Speaker 9: is going to put the babies r us stores and
Speaker 9: some of their stores, much like that they did with Sephora.
Speaker 9: McDonald's has a partnership with Krispy Kreme. And these things
Speaker 9: have dual benefit. So first there is these say things
Speaker 9: on labor and real estate of operating multiple stores as
Speaker 9: one store. And then there's that unique in store experience
Speaker 9: that the younger generations really like and they're great traffic drivers.
Speaker 9: I know that when I take an Amazon package back
Speaker 9: to Coles, I have to pass five departments each way
Speaker 9: to take that package back. So really creative solutions by
Speaker 9: retailers too.
Speaker 2: What are consumers doing here? Because we hear about inflation
Speaker 2: really hitting folks that maybe don't own stocks, don't own bonds,
Speaker 2: don't own real estate. Now they're the ones that are
Speaker 2: really being hit by inflation. How does that get reflected
Speaker 2: in a retail sales number that shows some pretty good
Speaker 2: strength this month.
Speaker 9: You know here too, back to my word of the month,
Speaker 9: creativetivity or creative consumers are also getting creative.
Speaker 8: We know that they're getting better and.
Speaker 9: Better at seeking and finding those deals. Here's an interesting
Speaker 9: stat We surveyed over one thousand shoppers to find that
Speaker 9: one third of those shoppers are buying their groceries in bulk,
Speaker 9: and they're sharing with their friends and their neighbors, which
Speaker 9: is a great way for the lower income household to
Speaker 9: enjoy the savings that come with larger products that have
Speaker 9: a better price for counter for ounce. Typically speaking, the
Speaker 9: lower income households on fixed budgets are forced to buy
Speaker 9: those smaller products because of that lower price points. So
Speaker 9: this is a great option for them. And by the way,
Speaker 9: there could soon be an app for that, because there's
Speaker 9: an app for that in South Africa today, so it's
Speaker 9: only a matter of time until it gets here. I
Speaker 9: have no idea how that would work, but we also
Speaker 9: never thought that we would share rides with perfect strangers
Speaker 9: in a car that's driven by a perfect stranger.
Speaker 4: Of what we do that is really interesting and that
Speaker 4: would definitely certainly live in an apartment complex like that
Speaker 4: could make things quite interesting as well. Just so everyone's clear,
Speaker 4: I did research sunscreen for your hair. It's really for
Speaker 4: your scalp. But I still think like why not wear
Speaker 4: a hat? But fair point, this is why it's inflation.
Speaker 4: And I was just looking at you can get a
Speaker 4: twenty five pack of mini pickle cupcakes at Baked by
Speaker 4: Melissa's for thirty seven dollars. Wow, that's like a lot
Speaker 4: of money for little, teeny tiny cupcakes. Anyway, this is
Speaker 4: kind of your point. So, Jill, what have we learned
Speaker 4: though about all the discretionary fun stuff like services, spas, vacations, getaways,
Speaker 4: the stuff that was doing really well.
Speaker 8: You know, sonsumers are have pent up demand for that.
Speaker 9: They're just finding lower cost ways to achieve those, and
Speaker 9: so we might be seeing more in value, but I'll
Speaker 9: go back to the transaction or sorry, in volume, but
Speaker 9: I'll go back to the transactional value typically speaking, that's down.
Speaker 9: So they're doing more of that that we've done before,
Speaker 9: but they're doing it at a lower rate.
Speaker 3: So I see.
Speaker 2: Yeah, Joe, how about the back to school that's probably
Speaker 2: the next shopping season for you that you get a
Speaker 2: sense of how retaillers are doing, how consumers are doing.
Speaker 2: What's the expectation for back to school this year?
Speaker 9: So, you know, kudos to the three big retailers who
Speaker 9: really created a summer of savings and really jumped jumped
Speaker 9: into trying to create a season and what is otherwise
Speaker 9: a lower season right now, So we just got done
Speaker 9: with the Walmart Deal Days, Target Circle Week, Today's the
Speaker 9: kickoff of Amazon's summertime Prime Days. All of those have
Speaker 9: discounts on thousands of items with a focus.
Speaker 8: On that school and no.
Speaker 9: Plus, Amazon is doing things like ropping a new deal
Speaker 9: every five minutes, and so they're really swinging for the
Speaker 9: fences in terms of capturing trips, creating sales, and trying
Speaker 9: to meet the consumer with economic value.
Speaker 4: What do you think will happen if the Fed cuts rates?
Speaker 4: And I say that because if all of a sudden
Speaker 4: we get relief and there's fifty bases points of cuts
Speaker 4: in the next four months, do people have a lot
Speaker 4: more money to spend? Is it actually an increase spending?
Speaker 8: Oh, we talk a lot about this.
Speaker 9: I mean, typically speaking, lower interest rates feel the purchases
Speaker 9: of large things like cars and homes, and so when
Speaker 9: they're making those purchases that might actually trickle down to small,
Speaker 9: smaller spends within the household, but typically speaking initially they
Speaker 9: don't have a near end effect on those smaller spends.
Speaker 9: That said, consumers are very attractive to enticing loan options.
Speaker 9: So let's talk about the buy now, pay later market.
Speaker 9: That's up twelve percent on a year over year basis.
Speaker 9: It accounts for eighty seven billion dollars in debt. There's
Speaker 9: lots of different figures out there. It's expected to grow
Speaker 9: at a twenty five percent tagger over the next set
Speaker 9: seven years. So let's hope that consumers can pay those
Speaker 9: back because they come with very very steep late piece
Speaker 9: as well as credit risk. But it's indicative of the
Speaker 9: fact that consumers are enticed by attractive loan options.
Speaker 2: Talks about like trading down. Are people trading down from
Speaker 2: I don't know, Walmart and a target to maybe the
Speaker 2: dollar stores? Do we see that activity or they just
Speaker 2: try to be more frugal within the targets and the
Speaker 2: Walmarts of the world.
Speaker 9: Oh boy, you know, I'm not fine when somebody gives
Speaker 9: the answer mixed, But I'm going to give you the
Speaker 9: answer mixed.
Speaker 8: A lot of households actually are trading down.
Speaker 9: The reason that I see mixed though, is that we
Speaker 9: see some of those mainstream retailers trying to be a
Speaker 9: dollar store.
Speaker 8: So they're trying, so they are, they're.
Speaker 9: Rolling out more and more smaller packages at lower price
Speaker 9: point to be able to capture that dollar, that dollar trip.
Speaker 9: So it's really it's really but overall though a trade down.
Speaker 8: It just varies whether.
Speaker 9: We're talking about trading down in categories like a stage
Speaker 9: to Aposta, treading down in channels from mainstream grows for
Speaker 9: to dollar, or trading down in brands from premium brand
Speaker 9: to a value or even private label.
Speaker 4: So great, Jill, we really appreciate you. That was just
Speaker 4: so interesting. I'm like now deep in the whole of
Speaker 4: all this weird stuff of upflation. So that's going to
Speaker 4: stay with me for a while. Jill Blanchhard, President of
Speaker 4: Enterprise Credit Client Solutions, have Advantage Solutions, Joining us from Chicago, Illinois.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business Act. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station,
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
Speaker 4: We are live in the Active broke A studio right
Speaker 4: here in midtown Manhattan. It's like one hundred degrees out today. Yeah,
Speaker 4: are you psyched that you're back in the office?
Speaker 2: Subway platform is gonna beat something I'm looking forward to today.
Speaker 4: Oh yeah, ditto, ditto. And this is when you want
Speaker 4: to be working from home, right you get the breeze Jersey.
Speaker 4: Sure he's broadcasting from the beach there, it is.
Speaker 2: That's my jam, But that's not the case. We are
Speaker 2: here in the city and I want to talk commercial
Speaker 2: real estate because this is just a critical, critical issue
Speaker 2: for the economy, for banks obviously, for the folks involved
Speaker 2: in the real estate business. And there's no better person
Speaker 2: to talk to for commercial real estate than Douglas Durst.
Speaker 2: He's a chairman a Durst Organization. Joining us live here
Speaker 2: on our Bloomberg at Directive Broker studio. We appreciate that, Douglas,
Speaker 2: Thank you so much for joining us here. The party
Speaker 2: line out there is commercial, particularly office real estate in
Speaker 2: urban areas, it's bad and it's going to get worse.
Speaker 2: So maybe we don't know how bad it is, is
Speaker 2: that the case or there are different layers under.
Speaker 5: That, it's certainly the case that you don't know how
Speaker 5: bad it is because it's not bad, Okay. In our portfolio,
Speaker 5: we are almost ninety five percent least across the portfolio
Speaker 5: except for a building that we started construction pre pandemic
Speaker 5: had to stop, and at eight twenty five Third Avenue,
Speaker 5: we're now about forty percent least in a year. Our
Speaker 5: other buildings are mostly fully occupied. At twenty nineteen, pre pandemic,
Speaker 5: we had three large office buildings vacated because tenants moved elsewhere.
Speaker 5: Those buildings are eleven fifty five where we just moved
Speaker 5: to one Bryant Park and building.
Speaker 4: Yeah, I mean, like you have some of the really
Speaker 4: amazing buildings. Do you have thirteen million square feet of
Speaker 4: prime Manhattan office real estate like one Brian Park, like
Speaker 4: one World Trade Center? So how is it like to
Speaker 4: fill those buildings now? And what's the rent like and
Speaker 4: what's their pricing power? Like you just walk us through
Speaker 4: because you prime off this real estate.
Speaker 5: We do, and the rents are higher than a pre pandemic.
Speaker 5: Bank of America just took additional space our space at
Speaker 5: one Bryan Park, So that's why we had to move
Speaker 5: to eleven fifty five. We're signing leases in eleven fifty five,
Speaker 5: which is a building that was built in nineteen eighty
Speaker 5: four was vacated in twenty twenty eighteen by White and Case.
Speaker 5: We completely redid the building, added new windows and new
Speaker 5: air conditioning.
Speaker 4: Is that the one on sixth Avenue. That's the one
Speaker 4: on this so I used to work there. We called
Speaker 4: it to Dusk Star because it was like this huge
Speaker 4: black tower of nothingness.
Speaker 5: The Darth Vader building.
Speaker 3: Exactly.
Speaker 4: Yes, okay, so and you fixed it, you made it pretty.
Speaker 1: We did.
Speaker 5: We actually we were there until we moved to one
Speaker 5: Bryant Park and we were all a little worried about
Speaker 5: moving back because it had been very dark. But it's
Speaker 5: now very bright and as I said, it's ninety five
Speaker 5: percent full. I just toured the space of Global Relay.
Speaker 5: Most people have not heard of it. It's a fintech
Speaker 5: company and they're moving from Northwest Canada. They took the
Speaker 5: top of the building. They made a spectacular build out.
Speaker 5: I think it's one of the best in the city.
Speaker 5: It certainly equals space here at Bloomberg, which is terrific space.
Speaker 5: And they're going to be hiring over three hundred people
Speaker 5: for their new office. This was their first office in
Speaker 5: New York City. Fintech is a big movement mover in
Speaker 5: the office economy. The other issue that people don't realize
Speaker 5: is the tech companies start out very small, but as
Speaker 5: soon as they move in, they're expanding. We started what
Speaker 5: we call durst Ready, which allows tenants to move right
Speaker 5: in small space short term leases, and most of them
Speaker 5: stay and expand. Some some don't work out, obviously, but uh,
Speaker 5: it's it's the new companies, the new industries that are
Speaker 5: really growing in New York. The older industries are just
Speaker 5: not growing and that's not an issue.
Speaker 2: So what I guess what I've learned about the commercial
Speaker 2: real estate market over the last several years, and I've learned,
Speaker 2: you know, exponentially what I knew before is that if
Speaker 2: you have a quality buildings, and like the Bloomberg building
Speaker 2: here is in a quality buildings not a plus. Fine,
Speaker 2: your your least your occupant occupancies are great. But if
Speaker 2: you're anything less B or C, those are challenging. And
Speaker 2: those are some that people are concerned about the values,
Speaker 2: concerned about the debt associated with those buildings. How do
Speaker 2: you see that part of the New York market, the
Speaker 2: B and C.
Speaker 5: Level, the B levels, it really depends on the ownership
Speaker 5: and what they've done. We have buildings I don't I
Speaker 5: would consider as okay, okay, but the first building we
Speaker 5: built six fifty five Third Avenue. When we built it,
Speaker 5: it was two hundred East forty second Street. You know,
Speaker 5: preferences for address has changed, so it's now a third
Speaker 5: Avenue address. It was vacated to about forty percent two
Speaker 5: years ago. It's now eighty percent least as I said
Speaker 5: it was built in. I didn't say nineteen fifty five.
Speaker 5: And we keep investing in our buildings, keep modernizing them,
Speaker 5: and that way we add, we add tenants or keep tenants.
Speaker 4: So when we talk about in a macro sense, ah,
Speaker 4: the Fed's gonna lower rates, et cetera. Does that What
Speaker 4: does that mean to you? When you're already in a
Speaker 4: position where your buildings are mostly occupied, you can raise
Speaker 4: your rents. What does that mean?
Speaker 5: Well, it means that the office market is not a monolith.
Speaker 5: There are buildings that are going to continue to do
Speaker 5: well and others that are going to fail. But those
Speaker 5: buildings that don't survive are going to be purchased at
Speaker 5: a lower cost, people are going to invest in them,
Speaker 5: and they're going to come back. Because the office market
Speaker 5: is continuing to grow and expand, where we leased a
Speaker 5: million square feet last year, which is the highest we
Speaker 5: leased in the past six years. So the office market
Speaker 5: is good. There are buildings that for because mostly interest rates.
Speaker 5: When when interest rates triple I think close to triple,
Speaker 5: the values go down. And that's if you have If
Speaker 5: you're financed at seven you're eighty percent. We only we
Speaker 5: try and stay under fifty percent. All of a sudden,
Speaker 5: your building is worth half of or not half, but yeah,
Speaker 5: considerably less than what it was and you cannot refinance.
Speaker 3: So that's kind of where I want to go.
Speaker 2: What is the lending market like today for commercial real estate?
Speaker 2: Does it depends? I mean, I assume your relationship with
Speaker 2: your bankers are very strong. But for the average commercial
Speaker 2: real estate, how are things up there?
Speaker 5: For the average commercial real estate and even for us,
Speaker 5: it's very, very tough. The FED has really clamped down
Speaker 5: on all commercial real estate and they do not realize
Speaker 5: that it's not monolithic, that not all buildings are in
Speaker 5: bad shape. We had to struggle for some of our
Speaker 5: loans to me put it that way, we had to
Speaker 5: really push to get our loans renewed right, and no
Speaker 5: matter how much we showed that we were in good shape,
Speaker 5: it's the FED that's pushing the reserves for banks that
Speaker 5: make it difficult for them to make these loans.
Speaker 4: Before we let you go, Are you buying right now?
Speaker 5: No, No, there's We're continuing to improve our buildings to
Speaker 5: invest our money in new buildings. There are a lot
Speaker 5: of people out there, a lot of these funds which
Speaker 5: we don't have at this moment, who are going to
Speaker 5: be picking up properties. So the market for the buildings
Speaker 5: that don't work is very strong.
Speaker 4: Really great to get your perspective. Thank you so much
Speaker 4: for coming in. There's one hundred degree degree day. We
Speaker 4: really appreciate that. Douglas Durst, chairman of the Durst Organization,
Speaker 4: resides in my former employment. I mean, we're going back
Speaker 4: twenty years, but still, yeah, I worked at White and Case.
Speaker 4: I was a paralegal man. Oh oh yeah, I worked
Speaker 4: at night. I worked from four pm until midnight.
Speaker 6: Wow.
Speaker 4: Yeah, okay, I did really great, amazing things like FedExing
Speaker 4: documents and faxing things. Fact, because that was still a thing.
Speaker 4: Page and look.
Speaker 3: At me now looking up.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
Speaker 1: Auto with the Bloomberg Business Act. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
Speaker 4: All right, let's go to Jody Schneider, now a political
Speaker 4: news director for Bloomberg Television and Radio. She's standing by
Speaker 4: in Milwaukee. Jody, the event, obviously last night was President
Speaker 4: former President Trump walking in with the bandage on his
Speaker 4: ear and then declaring that VP pick of JD. Vance,
Speaker 4: Senator from Ohio, walk me through what you learned last night?
Speaker 10: Well, yesterday we did have that on the announcement of JD.
Speaker 10: Vance as the pick was done in the afternoon, and
Speaker 10: then he showed up at the at the venue here
Speaker 10: at the convention Hall earlier in the evening. And then
Speaker 10: last night we did see former President Trump, uh, the
Speaker 10: almost nominee he will well he's been he's been now
Speaker 10: designated as a nominee who just has to give a
Speaker 10: speech on Thursday night, but he and JD. Vance were
Speaker 10: shown together. Neither of them spoke their speeches will be
Speaker 10: Wednesday and Thursday night. But it is clearly a passing
Speaker 10: of the torch to a new generation, making sure that
Speaker 10: this is the Uh, the whole philosophy of MAGA and
Speaker 10: president former President Trump's philosophy has been given now to
Speaker 10: a new generation because the vice presidential pick jd Vance
Speaker 10: espouses those same principles.
Speaker 2: Well, he didn't always espouse those same principles. Did he
Speaker 2: give us a little sense of kind of how jd
Speaker 2: Vance has evolved over the last several years as a politician.
Speaker 10: Yeah, that's right, he said, And he said some well
Speaker 10: noted differences with former President Trump. He once called him noxious.
Speaker 10: He has. He's somebody who was a First of all,
Speaker 10: he had a business career before he was a politician.
Speaker 10: He was a venture capitalist. He wrote a best selling book,
Speaker 10: Hill Billy Elogy, which is said to be, Uh, some
Speaker 10: of the principles in there about how he grew up
Speaker 10: poor in Ohio and kind of overcame that. It's been
Speaker 10: said to be a populist book, trying to reach out
Speaker 10: to more working class voters. Uh. He evolved from that
Speaker 10: and then became a United States Senator from Ohio. In
Speaker 10: recent years he has honed very closely to the principles
Speaker 10: that Donald Trump UH talks about, and he is said
Speaker 10: to have been a favorite UH that Donald Trump's sons
Speaker 10: Eric and Donald Trump Junior pushed for him because they
Speaker 10: saw him as would he would continue the magabrand Donald
Speaker 10: Trump's brand.
Speaker 3: Into the future.
Speaker 10: He's notably, he's thirty nine years old, not even forty
Speaker 10: years old, you know, a whole different generation than Donald Trump.
Speaker 4: It was interesting, Jody, because part of the rhetoric yesterday
Speaker 4: after the potential assassination was that President Trump was speaking
Speaker 4: about unity, which is something he doesn't do very often.
Speaker 3: JD.
Speaker 4: Vance, however, went to the far right and was saying, look,
Speaker 4: blaming President Biden for the attack on President Trump, very
Speaker 4: very divisive, and so some of people were talking about
Speaker 4: the fact that would President Trump pick a United vice president?
Speaker 4: He didn't. Did he do that because he also will
Speaker 4: stay divisive? Or does it give now President Trump the
Speaker 4: ability to be more of a unifier of the Republican
Speaker 4: Party while JD. Vans holds the holds the core.
Speaker 10: Yeah, that's a good question, and I think there is
Speaker 10: some of that. You know, Donald Trump now can sort
Speaker 10: of say, okay, you know, we don't want. You know,
Speaker 10: he can come out, especially since he was a target
Speaker 10: of an assassination attempt. He can come out and say
Speaker 10: there's no place for political violence. And Jade Vance can
Speaker 10: kind of, you know, be the tougher one on that right.
Speaker 10: He can be the one that says the things that
Speaker 10: Donald Trump, the top of the ticket doesn't want to say.
Speaker 10: But clearly there had been some talk of perhaps, you know,
Speaker 10: Donald Trump was going to pick somebody who could reach
Speaker 10: out more, say to women voters, to racial minorities for instance,
Speaker 10: you know, trying to get some of these swing state voters.
Speaker 10: But this is very much a doubling down on the brand,
Speaker 10: doubling down on you the core of their constituency, the
Speaker 10: white male, working class voters.
Speaker 2: All right, Jody, thank you so much for joining us.
Speaker 2: Jody Schneider, she's a political news director for Bloomberg Television
Speaker 2: and News. Joining us remotely from Milwaukee, Wisconsin, the site
Speaker 2: of the Public National Convention.
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apples, Spotify,
Speaker 1: and anywhere else you can get your podcasts. Listen live
Speaker 1: each weekday ten am to Eastern on Bloomberg dot com,
Speaker 1: the iHeartRadio app, Tune in and the Bloomberg Business App.
Speaker 1: You can also watch us live every weekday on YouTube
Speaker 1: and always on the Bloomberg terminal