WEBVTT - Amazon, CES, Inflation, and Latino Businesses (Podcast) 0:00:00.800 --> 0:00:04.040 Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney alongside 0:00:04.040 --> 0:00:06.920 my co host Matt Miller. Every business day we bring 0:00:06.960 --> 0:00:11.520 you interviews from CEOs, market pros, and Bloomberg experts, along 0:00:11.520 --> 0:00:15.600 with essential market moving news. Find the Bloomberg Markets Podcast 0:00:15.600 --> 0:00:18.439 on Apple Podcasts or wherever you listen to podcasts, and 0:00:18.480 --> 0:00:23.520 at Bloomberg dot com Slash podcast. Let's talk retail because 0:00:23.560 --> 0:00:25.479 we had Bed Bathroom Beyond, which by the way, is 0:00:25.480 --> 0:00:29.120 based in Union, New Jersey. In my backyard, we've got 0:00:29.200 --> 0:00:33.760 Amazon laneoff people. So jobs right, yeah, I mean we 0:00:34.000 --> 0:00:37.640 don't know. That's right, that's eight jobs. So let's roundtable 0:00:37.680 --> 0:00:40.000 a little bit here on the retail space. We can 0:00:40.000 --> 0:00:42.240 do that with Punum Boyle. She covers all the retail stuff. 0:00:42.800 --> 0:00:46.320 Don't forget intelligence. Yeah, we'll talk about that. John Edwards, 0:00:46.400 --> 0:00:51.040 the third team leader, covers the US consumer retail luxury space. Um, John, 0:00:51.080 --> 0:00:52.720 thanks so much for coming here in our Bloomberg and 0:00:52.800 --> 0:00:54.840 Actor Broker studio. You get a gold Star and my 0:00:54.920 --> 0:00:58.360 friend Um talk to us about Bed Bathroom Beyond. This 0:00:58.400 --> 0:01:01.200 is just there's They have news today about a going 0:01:01.240 --> 0:01:05.319 concern issue. Um. Is this this poor management or is 0:01:05.319 --> 0:01:08.559 this some symptom of just greater retail. Do you think, Yeah, 0:01:08.600 --> 0:01:12.760 it's it's a combination of things. I mean, it's it's definitely. Um, 0:01:12.800 --> 0:01:15.399 you know, they're they're affected by the things that are 0:01:15.640 --> 0:01:22.880 affecting retail broadly, but they do have some company specific 0:01:22.959 --> 0:01:26.080 problems that have been plaguing them for years and if 0:01:26.080 --> 0:01:29.240 not really gotten any better. Uh. You know. One of 0:01:29.319 --> 0:01:32.200 one of the main issues they had was that they 0:01:32.240 --> 0:01:36.440 made this big push toward private label goods, you know, 0:01:36.520 --> 0:01:40.399 which in theory, uh, you know, is a positive for 0:01:40.760 --> 0:01:44.200 a retailer if they can get people buying you know, 0:01:44.240 --> 0:01:49.080 private label products that they create themselves, that obviously boost 0:01:49.080 --> 0:01:53.080 their margins by you know, um, reducing the things that 0:01:53.120 --> 0:01:55.600 they have to buy from others. Are they quality? They 0:01:55.720 --> 0:01:59.880 Kirkland well products? That's that is that's the issue. They 0:02:00.000 --> 0:02:04.440 are not Kirkland levels. Uh. No, they they had just 0:02:04.520 --> 0:02:09.320 a variety of problems with with introducing these products under 0:02:09.520 --> 0:02:13.520 a you know, now three CEOs ago. Uh. They brought 0:02:13.560 --> 0:02:18.799 in uh, guy Mark Tritton from from Target with who 0:02:18.960 --> 0:02:23.640 had you know, extensive experience, successful experience there with private label, 0:02:24.080 --> 0:02:28.000 but you know, he had execution problems at bed Bath 0:02:28.000 --> 0:02:30.600 and Beyond as well. You know, he in some ways 0:02:30.880 --> 0:02:34.080 tried to apply too much of the sort of identical 0:02:34.560 --> 0:02:38.560 target playbook to uh, you know, to bed Bath, which 0:02:38.600 --> 0:02:42.400 didn't have the internal infrastructure to support a lot of 0:02:42.480 --> 0:02:46.440 his his goals. So so, Pum, I want to bring 0:02:46.480 --> 0:02:48.320 you in here, you know, as we're talking about bed 0:02:48.320 --> 0:02:50.200 Beth and beyond, I love to just pull it back 0:02:50.280 --> 0:02:52.080 the lens a little bit and just talk about retail 0:02:52.080 --> 0:02:54.880 in general. Give us your sense of just the consumers 0:02:54.880 --> 0:02:58.880 seem strong. We got some good jobs data again today. Um, 0:02:58.960 --> 0:03:01.880 it seemed like the hollid season was pretty good. I'd 0:03:01.880 --> 0:03:03.919 love to get your assess. And because you see so 0:03:03.960 --> 0:03:06.880 many retail companies to talk to so many of those investors, 0:03:07.000 --> 0:03:09.600 what are you hearing about the environment out there? Yeah, 0:03:09.680 --> 0:03:12.040 so the environment is still mixed. Really if you think 0:03:12.040 --> 0:03:14.000 about what we saw were the holiday we did have 0:03:14.000 --> 0:03:16.200 a good holiday season. Adobe just came out with their 0:03:16.200 --> 0:03:19.000 e commerce UM numbers that holiday sales were up three 0:03:19.000 --> 0:03:21.960 point five percent and that's better than they had estimated. 0:03:22.280 --> 0:03:24.400 So overall good. But you know, I think when we 0:03:24.440 --> 0:03:26.799 start to see earnings later this month and into February, 0:03:27.000 --> 0:03:29.120 there will be mixed treats. Because remember there was a 0:03:29.160 --> 0:03:32.000 snowstorm right in the Northeast right ahead of the Christmas season, 0:03:32.400 --> 0:03:36.000 which probably truncated a lot of the sales that would 0:03:36.040 --> 0:03:38.960 have been there and may have really prompted more gift 0:03:39.000 --> 0:03:41.200 card sales well, because people couldn't get out and get 0:03:41.200 --> 0:03:43.240 to the stores. They couldn't get out and whatever was 0:03:43.320 --> 0:03:45.800 coming from online probably couldn't make it there because of 0:03:45.800 --> 0:03:48.160 the snow storm. So really a double whammy there where 0:03:48.160 --> 0:03:50.400 you couldn't shop online and you couldn't shop in stores. 0:03:51.120 --> 0:03:53.920 Outside of that, the consumer, yeah, they're they're holding up, 0:03:53.920 --> 0:03:56.600 but they're spending where they want to spend. So really 0:03:56.640 --> 0:03:59.200 you have to be the brand that they're seeking for 0:03:59.320 --> 0:04:01.680 you to get the bus this and do well. And 0:04:01.680 --> 0:04:03.440 and there are brands out there that are that are 0:04:03.480 --> 0:04:05.080 doing well. You know, we think at Sea is one 0:04:05.120 --> 0:04:08.120 of them on the online space that continues to drive 0:04:08.160 --> 0:04:10.760 shoppers to its website because it's unique in what it 0:04:10.840 --> 0:04:13.119 offers and there's really no one else like them. Yeah, 0:04:13.120 --> 0:04:15.960 it's you know, this is interesting. I've been looking lately. 0:04:16.000 --> 0:04:18.800 I've been trying to focus on buying products that are 0:04:18.839 --> 0:04:23.039 made in America or you know, made in Europe, like 0:04:23.080 --> 0:04:27.360 a leather jacket. Well, for example, those are handmade in Scotland. 0:04:27.400 --> 0:04:32.480 But if you look on Amazon, I've noticed nearly everything 0:04:32.560 --> 0:04:34.960 on Amazon is made in China. I don't know why 0:04:35.200 --> 0:04:37.120 I don't just drop the middleman and go straight to 0:04:37.160 --> 0:04:42.240 Ali Baba because Jeff bezos factory is in China. Um. 0:04:42.360 --> 0:04:46.240 Then I discovered Etsy, where you can find things that 0:04:46.320 --> 0:04:49.600 are made by people who get a working wage or 0:04:49.680 --> 0:04:52.239 at least run their own businesses, which made me happy. 0:04:52.320 --> 0:04:55.560 But the user experience isn't quite nearly as good. Um 0:04:56.680 --> 0:05:01.159 is there is there any uh sense that deglobalization is 0:05:01.200 --> 0:05:04.640 coming to Amazon? Are they? Are they at all affected 0:05:04.720 --> 0:05:09.360 by the US China the poor trade relationship? I mean, 0:05:09.480 --> 0:05:12.159 I think all of retails is affected by that. It's 0:05:12.240 --> 0:05:15.240 not just Amazon, right, we import. Most of what we 0:05:15.279 --> 0:05:19.600 consume is imported, and China is a big area where 0:05:19.640 --> 0:05:23.080 we are dependent on So that doesn't just impact Amazon 0:05:23.080 --> 0:05:25.600 and impact all of retail. Really, I don't mind importing 0:05:25.640 --> 0:05:30.240 stuff if if I'm importing it from h a producer 0:05:30.400 --> 0:05:34.039 that pays a decent wage, maybe uses union labor, you 0:05:34.080 --> 0:05:37.719 know where I'm not worried about sweatshops or kids making 0:05:37.720 --> 0:05:41.160 this stuff. Hey, John, I know in your beat you 0:05:41.279 --> 0:05:48.160 cover luxury I can't. I'm so surprised how luxury remains 0:05:48.400 --> 0:05:51.880 so strong cycle in, cycle out. What are we hearing 0:05:51.920 --> 0:05:55.599 from the luxury brands these days? Uh? Yeah, they continue 0:05:55.640 --> 0:05:58.640 to hold up. I mean, I think what we're starting 0:05:58.680 --> 0:06:02.119 to see is, you know, some of the entry level 0:06:02.520 --> 0:06:05.480 luxury goods, you know, some of your sort of accessories, 0:06:05.480 --> 0:06:09.960 your belts, your uh Gucci shower shoes, your things, all that, 0:06:10.600 --> 0:06:14.080 are you know, starting to weaken a bit, because you know, 0:06:14.120 --> 0:06:17.520 those are the luxury customers who are most exposed to 0:06:18.080 --> 0:06:21.680 uh you know, feeling the pinch of inflation. But you know, 0:06:22.240 --> 0:06:25.400 the rich are still rich and uh you know, still 0:06:25.400 --> 0:06:27.520 want what they want. You know. A Astin was saying, 0:06:27.560 --> 0:06:29.360 they're not going to bed bath and beyond, though, John, 0:06:29.440 --> 0:06:32.680 they cover both luxury and bed bath and beyond. We 0:06:32.760 --> 0:06:36.520 cover it all. I was thinking about in in the 0:06:36.560 --> 0:06:40.159 bigger picture of the whole Wall Street bets phenomenon, the 0:06:40.160 --> 0:06:42.800 meme stock thing that we covered a couple of years ago. 0:06:43.480 --> 0:06:46.520 Are there companies out there that should have gone bust 0:06:46.720 --> 0:06:51.159 but didn't because of buyers of stocks with their with 0:06:51.200 --> 0:06:53.960 their stinnies. I mean, I you know, I certainly can't 0:06:53.960 --> 0:06:56.480 call out any boy name, but yeah, you could probably 0:06:56.480 --> 0:07:00.360 say that there are some companies who's uh, poor Wormans 0:07:00.440 --> 0:07:03.160 was papered over for a while by the fact that, yeah, 0:07:03.600 --> 0:07:06.479 they got, you know, caught in the meme wave the 0:07:06.560 --> 0:07:08.919 road that as long as they could. It's funny. The 0:07:08.960 --> 0:07:12.040 bed bath and beyond near me is right next to 0:07:12.080 --> 0:07:14.720 the game stop in this little strip mall that you 0:07:14.760 --> 0:07:16.680 want to kind of avoid it all calls right, you 0:07:16.720 --> 0:07:20.520 know exactly, there's a harsh fluorescent lighting everywhere if they 0:07:20.640 --> 0:07:24.080 leave the lights on at all. And alright, some news 0:07:24.160 --> 0:07:25.680 just crossing the Bloomberg terminal. I want to get it 0:07:25.680 --> 0:07:29.640 out there. Putin orders. January six, seventh, ceasefire in Ukraine. 0:07:29.840 --> 0:07:32.120 The Kremlin says, well more reporting on that, but that's 0:07:32.360 --> 0:07:35.160 gets your attention there. Put um um In terms of 0:07:35.160 --> 0:07:37.160 the retail space here is now that we're kind of 0:07:37.200 --> 0:07:39.880 through the holiday season, give us a sense of kind 0:07:39.880 --> 0:07:42.040 of how the inventory levels are. I know that was 0:07:42.080 --> 0:07:44.840 an issue for a lot of retailers, leading them to 0:07:44.880 --> 0:07:47.040 maybe really be aggressive on some of the promotions. Here, 0:07:47.040 --> 0:07:50.240 how are inventories looking. Inventories are still a little bloated. 0:07:50.280 --> 0:07:53.840 While sales were good, they entered inventories really high. So 0:07:53.920 --> 0:07:56.240 we think January will be the key month for them 0:07:56.280 --> 0:07:59.360 to really press on promotions and clear out all that 0:07:59.400 --> 0:08:01.920 inventory to make room for a spring goods. But this 0:08:02.000 --> 0:08:03.920 is the This is a clearance month for retail, and 0:08:03.960 --> 0:08:07.200 we expect retailers to push as much inventory as they 0:08:07.240 --> 0:08:09.680 can out of their system this month. Is it going 0:08:09.720 --> 0:08:12.840 to be harder for our is someone like Target who 0:08:12.880 --> 0:08:15.240 had a difficult time managing inventory, You're gonna be doing 0:08:15.240 --> 0:08:18.720 more discounting. There will be more discounting across retail right now, 0:08:18.760 --> 0:08:20.560 just because the inventories have to get out. And even 0:08:20.600 --> 0:08:23.320 if you are Lena on inventory, if your neighbor is 0:08:23.360 --> 0:08:26.480 discounting aggressively, in order for you to get wallet chair, 0:08:26.560 --> 0:08:29.480 you also need to increase your promotional activity. That's just 0:08:29.600 --> 0:08:33.520 how retail works. Hey, John. Lastly, are there still too 0:08:33.520 --> 0:08:35.880 many stores in the US? Do you think because we've 0:08:35.920 --> 0:08:38.680 seen so many store closures and Punam has been, you know, 0:08:38.800 --> 0:08:40.920 writing a lot about that in her research, and we 0:08:41.000 --> 0:08:44.199 probably had that accelerator in the pandemic. What do you 0:08:44.240 --> 0:08:46.600 hear from some of the retailers you guys cover, Yeah, well, 0:08:46.679 --> 0:08:49.559 it's um You know, for one thing, there are still 0:08:49.600 --> 0:08:53.000 stores being open, but most of them are dollar stores. Okay, 0:08:53.320 --> 0:08:56.240 that's that's an area where the physical retail is still 0:08:56.280 --> 0:09:00.640 expanding rapidly. Um. But yeah, a lot of the you know, 0:09:00.679 --> 0:09:04.400 sort of mid level and higher end um retailers are 0:09:04.440 --> 0:09:08.400 becoming more selective about where they place there, uh, their 0:09:08.440 --> 0:09:13.000 physical locations and uh you know, we also see companies 0:09:13.000 --> 0:09:17.800 doing things like converting parts of their stores to online 0:09:17.800 --> 0:09:21.040 fulfillment centers, you know, because there's too much online stuff. 0:09:21.440 --> 0:09:25.000 I'm looking for pickleball rackets, find them in a physical store. 0:09:25.000 --> 0:09:27.800 Follow from who follows fans better than you. You've got 0:09:27.800 --> 0:09:30.079 to get them from Jeff Bezos, who to get some 0:09:30.200 --> 0:09:32.280 sources them directly in China. All right, do you wear 0:09:32.320 --> 0:09:35.280 the leather jacket when you're playing? Probably? John Edwards the 0:09:35.320 --> 0:09:37.760 third he's a team leader US consumer Retail for Bloomberg 0:09:37.760 --> 0:09:40.760 News and put them boil covers all things for Bloomberg Intelligence. 0:09:41.880 --> 0:09:46.880 Out in Las Vegas, Math, there's a little technology conference 0:09:46.880 --> 0:09:49.520 called the Consumer Electronics Show. Gets a couple hundred thousand 0:09:49.520 --> 0:09:51.880 people out there to see all the new cool gadgets 0:09:51.920 --> 0:09:54.200 and stuff like that. It's really become, i think an 0:09:54.240 --> 0:09:57.880 automotive conference. They have such a huge presence there. The 0:09:57.920 --> 0:10:01.920 automotive industry. At the cs UH convention, Martin Fisher board member, 0:10:02.080 --> 0:10:05.400 z F Group and Bloomberg Technology host ed love. Though 0:10:05.440 --> 0:10:07.880 he's out in Vegas, he joins us. They both join 0:10:07.960 --> 0:10:10.439 us to discuss what's going on out there from the 0:10:10.480 --> 0:10:13.720 auto perspective. Uh, Martin Fisher, thanks so much for joining 0:10:13.800 --> 0:10:18.600 us here. ZF Group, the world's largest automotive supplier mobility company. 0:10:18.640 --> 0:10:21.640 What do you guys doing at CES this year? Why 0:10:21.679 --> 0:10:23.559 is that and why is this a convention important to 0:10:23.559 --> 0:10:26.920 you guys? I mean, FS for us has always been 0:10:26.960 --> 0:10:30.480 the plower place to present our large scale innovations and 0:10:30.520 --> 0:10:33.480 also some smallest smart ideas, and that's what we're up 0:10:33.559 --> 0:10:36.840 to this year as well. So we focus on the 0:10:36.920 --> 0:10:40.840 key trends of automated driving and electrification and I have 0:10:40.920 --> 0:10:44.959 good news to present in both areas. So what well? 0:10:45.000 --> 0:10:47.680 First of all, I gotta say your resume looks awesome 0:10:47.800 --> 0:10:52.000 from a car guy perspective. You were at vd Siemens Video, 0:10:52.360 --> 0:10:55.040 you were the CEO at Hella. I was just searching 0:10:55.080 --> 0:10:58.320 for some of their products online. General manager at Borg Warner, 0:10:58.360 --> 0:11:00.760 famous for making the turbos. Z F Group makes the 0:11:00.800 --> 0:11:05.720 best transmissions in the world. Um, what a sweet career, 0:11:05.800 --> 0:11:09.280 you've had what I mean, what gets boring? Right? What? 0:11:09.280 --> 0:11:12.080 What gets you excited? What do you what do you have? 0:11:12.160 --> 0:11:15.679 What are you showing at CES? Yeah, the whole transformation 0:11:15.720 --> 0:11:18.040 that we go through is really what keeps me exciting. 0:11:18.320 --> 0:11:20.600 And we have a couple of highlight topics out here. 0:11:21.200 --> 0:11:25.280 We are revealing later today our latest generation autonomous shuttle 0:11:25.720 --> 0:11:28.920 and that's really for me as an engineer. And if 0:11:29.000 --> 0:11:34.040 that strong automotive background, really a highlight autonomous shovel means 0:11:34.120 --> 0:11:36.560 we bring up a vehicle that you know, it's about 0:11:36.679 --> 0:11:40.400 twenty people, it's electrically driven, and it's fully autonomous, so 0:11:40.440 --> 0:11:43.600 it's gonna blend nicely and safely into the traffic. And 0:11:44.240 --> 0:11:47.560 that's how a highlight presentation for today. Who who? Who's 0:11:47.559 --> 0:11:50.320 your customer? There? Is it like the Walt Disney Disney 0:11:50.320 --> 0:11:52.880 World so they can shuttle people around? Or is it 0:11:53.840 --> 0:11:57.760 a corporate campus a college campus? I mean, Vegas seems 0:11:57.800 --> 0:12:00.600 like a good place you can ferry at Ludlow back 0:12:00.640 --> 0:12:05.240 and forth from from the fair Grounds to his suite 0:12:05.240 --> 0:12:09.520 at the Villaggio or yeah, absolutely no, those are already 0:12:09.600 --> 0:12:12.679 very good use cases. Plus it is also in addition 0:12:12.679 --> 0:12:15.800 to the public transportation systems. So when you go into 0:12:15.800 --> 0:12:19.920 a metro pilotan areus and you have subway systems, conventional 0:12:19.960 --> 0:12:23.040 bus systems, where we fall short of is typically the 0:12:23.120 --> 0:12:26.199 last mild transportation solutions. So how do I get from 0:12:26.200 --> 0:12:29.760 the subway station into my neighborhood? And that's where these 0:12:29.760 --> 0:12:34.040 shuttles can help. All of the business cases are l 0:12:34.360 --> 0:12:36.800 You the technology reporter for Bloomberg News, You've seen it all. 0:12:36.920 --> 0:12:40.240 You you have to be at cees from start to finish. 0:12:40.320 --> 0:12:42.680 What's your what's your sense of what's kind of some 0:12:42.720 --> 0:12:45.640 of the highlights out there. It's it's interesting to have 0:12:45.679 --> 0:12:48.400 Martin on the program. Good morning to Martin. You know 0:12:48.480 --> 0:12:53.119 Matt's riot. He is a brilliant cv zs so important 0:12:53.240 --> 0:12:56.959 in globals. Most White Chaine for me, like the famous 0:12:57.000 --> 0:13:00.600 series Let's Get Real, guys, Let's get real. And the industry. 0:13:00.679 --> 0:13:03.200 You know, when I was here in we were talking 0:13:03.240 --> 0:13:06.920 about robotaxis and we were talking about autonomy, and the 0:13:06.960 --> 0:13:09.800 bubbles burst a little bit in that time. But I 0:13:09.840 --> 0:13:13.280 think what's interesting about theF is that they have a 0:13:13.360 --> 0:13:18.040 track record with existing shuttles that working very narrowly defined settings, 0:13:18.679 --> 0:13:22.760 specific lanes in g O fence locations like campuses and 0:13:22.840 --> 0:13:24.920 Martin correct me if I'm wrong, but I think that 0:13:24.960 --> 0:13:27.160 you know, this is kind of an extension of that. Right, 0:13:27.400 --> 0:13:30.040 we're talking about thousands of shuttles with beef over a 0:13:30.120 --> 0:13:33.320 number of years, although I'd be interested to know how soon, 0:13:33.440 --> 0:13:36.000 how many years is this going to happen, because that 0:13:36.000 --> 0:13:38.560 that's really the conversation here at the S like, let's 0:13:38.640 --> 0:13:40.599 let's start announcing some things that are actually going to 0:13:40.720 --> 0:13:44.480 materialize into the real one. Yeah, you're right on its 0:13:44.480 --> 0:13:47.440 solid scaling, and that's how we approached the whole tubbles. 0:13:48.240 --> 0:13:51.199 As you said, we have frost solutions in operations for 0:13:51.480 --> 0:13:56.080 years now and they are inddicated lanes, controlled environment, but 0:13:56.240 --> 0:13:59.000 for us to experience the through stuffs and now we 0:13:59.120 --> 0:14:03.040 go into a traffic operations with the lately announced shuttle. 0:14:03.840 --> 0:14:06.000 Your question, how is it going to hit the market? 0:14:06.480 --> 0:14:09.920 Also out in Vegas yesterday we announced a new partnership 0:14:10.080 --> 0:14:13.880 with Beep Beep as an operator for such autonomous shuttles, 0:14:13.920 --> 0:14:17.560 and that agreement enables us to deliver a couple of 0:14:17.559 --> 0:14:21.280 thousand shuttles into the US market. In terms of timing, 0:14:21.600 --> 0:14:25.520 we will have first vehicles delivered in and then I'm 0:14:25.560 --> 0:14:30.320 going to ramp up in Are you talking with any governments? 0:14:30.360 --> 0:14:33.200 I mean, I know that I'm sitting right here. In Manhattan. 0:14:33.240 --> 0:14:35.920 There's a bus that just every day goes back and 0:14:35.960 --> 0:14:39.040 forth along Central Park, doesn't change the route, isn't going 0:14:39.160 --> 0:14:43.240 very far, takes about twenty or thirty people. Uh why 0:14:43.240 --> 0:14:46.280 don't you talk to the m T A. Yeah, no, 0:14:46.400 --> 0:14:48.520 that's happening, and we do it here and we as 0:14:48.640 --> 0:14:51.880 through partners through BEEP in this case, UM in Europe 0:14:51.960 --> 0:14:54.560 where we are home based, we go also straight into 0:14:54.680 --> 0:14:58.560 these public government discussions. So it's a new avenue for us. 0:14:59.320 --> 0:15:02.600 And in Vegas, what's the fielder as a crowded is 0:15:02.680 --> 0:15:06.160 our people back? Is a pre pandemic? Do you think? Yeah? Yeah, 0:15:06.160 --> 0:15:08.080 I think it is. I think you know, I need 0:15:08.120 --> 0:15:10.120 to talk to the organizers about the official number. And 0:15:10.160 --> 0:15:11.880 actually I'll be honest with you, the c P A 0:15:11.880 --> 0:15:15.200 a pretty kg about it and have been since. But 0:15:15.400 --> 0:15:17.560 you know, my sense of being here is that we're 0:15:17.560 --> 0:15:20.080 back to full sense c S. I think for like 0:15:20.200 --> 0:15:22.400 r global audience, right, you have to appreciate what it is. 0:15:22.440 --> 0:15:23.840 It is a lot of fun. You know, this is 0:15:23.920 --> 0:15:26.280 Las Vegas, right, I won't tell you what I did 0:15:26.320 --> 0:15:28.280 last night, but I did a lot of work late 0:15:28.280 --> 0:15:31.400 into the evening. Yeah, but you know a lot of 0:15:31.400 --> 0:15:34.080 bankers that there are bankers here, there are investors here, 0:15:34.080 --> 0:15:36.320 there are there executives, and I bet you Martin won't 0:15:36.320 --> 0:15:38.280 give us any names. But it's a great chance to 0:15:38.320 --> 0:15:40.880 speed date everyone that you want to see. You can 0:15:40.920 --> 0:15:43.280 see in the space of three days. And that's really 0:15:43.280 --> 0:15:45.760 what it's about. It's about getting all your client meetings 0:15:45.760 --> 0:15:48.600 in doing some deals. Maybe Martin's done some last night 0:15:48.640 --> 0:15:51.480 over dinner. I don't know the question for him, but 0:15:51.840 --> 0:15:54.720 that's kind of the vibe to alright, good stuff. Martin Fisher, 0:15:54.840 --> 0:15:58.080 member of the board of Management at ZF Group and 0:15:58.440 --> 0:16:02.000 at the Low at a Ballooon News in Vegas at 0:16:02.080 --> 0:16:08.400 the ce S. Natalie Trevor Thick, head of investment grade 0:16:08.440 --> 0:16:13.040 credit strategy at paid In in in Regal. So, Natalie, how's 0:16:13.040 --> 0:16:16.320 my analysis? Hold up? It can't be any worse. Is 0:16:16.320 --> 0:16:20.160 got to be better? What's your outlook? Yeah, you're absolutely right. 0:16:20.200 --> 0:16:23.080 We're at a much better starting point here. On bonds, 0:16:23.160 --> 0:16:24.760 you can buy one year tea bills for four and 0:16:24.760 --> 0:16:27.080 a half percent, or corporate bonds for five and a 0:16:27.160 --> 0:16:29.880 half percent. So we think fixed income can go back 0:16:29.920 --> 0:16:33.280 to be being the safe haven asset class um as 0:16:33.320 --> 0:16:36.480 people expect and deliver nice positive returns in two thousand 0:16:36.560 --> 0:16:41.280 and twenty three. So, um, we're talking about treasuries, but 0:16:41.320 --> 0:16:45.160 what about corporates. Um. Obviously, fixed income is a very 0:16:45.200 --> 0:16:50.240 big universe. What do you like the best? Yeah, corporate 0:16:50.240 --> 0:16:53.040 bonds are very attractive, particularly in the front end of 0:16:53.040 --> 0:16:55.440 the curve. You can get yields five and a half 0:16:55.480 --> 0:16:58.880 even six percent in investment grade credit. That's nearly double 0:16:58.920 --> 0:17:00.560 what you can get in high yield the couple of 0:17:00.640 --> 0:17:03.480 years ago, and high yield yielding you know, around nine. 0:17:04.320 --> 0:17:08.600 So given a strong fundamental backdrop, corporations really aren't in trouble. 0:17:08.600 --> 0:17:11.240 They may see some margin compression which is hurting their 0:17:11.240 --> 0:17:15.080 equity performance, but from a bond perspective, they're still quite strong. 0:17:15.200 --> 0:17:17.680 So we think investing in credit is a nice place 0:17:17.680 --> 0:17:20.240 for investors to park their money if they're worried about 0:17:20.240 --> 0:17:24.040 a recession or inflation and volatility and the equity markets well, 0:17:24.040 --> 0:17:26.760 and as you go further out the risk spectrum, you've 0:17:26.760 --> 0:17:31.439 got to start to worry about defaults. Apparently covenants have 0:17:31.480 --> 0:17:34.359 gotten a lot weaker over the past few years investors 0:17:34.359 --> 0:17:38.560 search for hunt for yield. Um, what are your concerns 0:17:38.800 --> 0:17:44.400 in three are defaults? Yeah, we really don't see defaults 0:17:44.440 --> 0:17:47.199 moving materially higher off of their current level. Maybe they 0:17:47.280 --> 0:17:49.679 get up to four per cent, and there are some 0:17:49.760 --> 0:17:52.560 concerns in the triple B a triple C sector, but 0:17:52.680 --> 0:17:55.320 for the most part, high yield companies have extended their 0:17:55.359 --> 0:17:58.440 maturities so they don't really have a hanging debt wall, 0:17:58.560 --> 0:18:01.040 so it's pretty expensive for them to issue right now, 0:18:01.040 --> 0:18:03.280 and most companies can hold off to issuing until two 0:18:03.320 --> 0:18:06.199 thousand twenty four or later, so we don't think the 0:18:06.240 --> 0:18:08.880 default story is a big story for two thousand twenty three, 0:18:09.119 --> 0:18:13.879 and most of these companies can weather mild recession. Natalie, 0:18:13.960 --> 0:18:16.720 In terms of you know an investment grade side, Um, 0:18:16.880 --> 0:18:19.240 what are some of the sectors that you guys are 0:18:19.080 --> 0:18:23.000 are favoring right now? We still favor some of the 0:18:23.040 --> 0:18:27.720 defensive sectors, such as pharmaceuticals and healthcare utilities, But we 0:18:27.800 --> 0:18:31.199 also think the banking sector has cheapened up materially and 0:18:31.280 --> 0:18:34.240 these banks still have strong balance sheets, so we're comfortable 0:18:34.480 --> 0:18:36.160 that they aren't going to see the kind of uh 0:18:36.520 --> 0:18:38.919 financial crisis they saw on the Great recession. Even if 0:18:38.960 --> 0:18:41.720 we were to go into another recession, and they offer 0:18:41.760 --> 0:18:46.200 pretty Commumpelly meals in duration, how far are you willing 0:18:46.400 --> 0:18:48.080 to go out here? Because, as you mentioned, on a 0:18:48.119 --> 0:18:50.680 two year note, you can get four point four six 0:18:50.680 --> 0:18:53.600 percent here and a four to your treasury. So on 0:18:53.640 --> 0:18:55.880 the corporate credit side, how far are you guys willing 0:18:55.880 --> 0:18:58.760 to go out? We are willing to buy thirty years 0:18:59.080 --> 0:19:02.480 typically higher quality bonds. There there is quite an inverted 0:19:02.560 --> 0:19:05.200 treasury curve, you know, as two years are yielding nearly 0:19:05.200 --> 0:19:07.000 four and a half percent and thirty years are only 0:19:07.040 --> 0:19:10.280 at three point eight percent. But investors want to lock 0:19:10.320 --> 0:19:12.840 in these higher yields because if they think that the 0:19:12.880 --> 0:19:15.720 Fed's going to pivot eventually, maybe not this year, but 0:19:15.840 --> 0:19:17.680 and be cutting rates, they want to lock in these 0:19:17.720 --> 0:19:20.560 longer yields further out the curve. So we are seeing 0:19:20.600 --> 0:19:22.840 quite a lot of demand for corporates in ten and 0:19:22.920 --> 0:19:27.240 thirty years. Yeah, we are hearing more and more people 0:19:27.320 --> 0:19:30.840 talk about the possibility of a pivot not coming in 0:19:31.840 --> 0:19:37.040 until what's your view? We agree with that view. But 0:19:37.160 --> 0:19:40.640 despite how hard the FED tries to deliver a hawkish signal, 0:19:40.880 --> 0:19:43.159 investors just aren't buying it. They seem to be in 0:19:43.200 --> 0:19:46.000 the camp that inflation is coming down, the Fed's getting 0:19:46.000 --> 0:19:48.200 it under control, and we are going to keep rates 0:19:48.240 --> 0:19:51.000 higher for longer. So, you know, we had a little 0:19:51.000 --> 0:19:53.200 bit of a rate reversal today, but what we've seen 0:19:53.240 --> 0:19:56.640 consistently since, uh the beginning of November, is that rates 0:19:56.640 --> 0:20:00.119 are moving lower. Not only when you go to talk 0:20:00.119 --> 0:20:01.960 to your clients. What's kind of some of the big 0:20:02.000 --> 0:20:05.720 issues that they're asking you? Again, two was such a 0:20:06.160 --> 0:20:09.080 you know, really difficult year for fixed income investors. They've 0:20:09.160 --> 0:20:12.240 never seen it before. What are they asking you these days? 0:20:13.720 --> 0:20:17.000 Most investors understand what happened in two thousand twenty two 0:20:17.040 --> 0:20:20.239 given the extreme raise and interest rates, and investors are 0:20:20.280 --> 0:20:23.560 more looking for opportunities right now, asking where in credit 0:20:23.600 --> 0:20:26.480 market should they get involved, just because we do expect 0:20:26.480 --> 0:20:29.840 the volatility to continue, particularly in equity markets, and they 0:20:30.040 --> 0:20:32.800 arguing it as a safe haven asset class once again. 0:20:33.680 --> 0:20:36.240 I'm excited, you know, because for the past by some 0:20:36.320 --> 0:20:39.560 bonds a couple of decades, I've been thinking my whole 0:20:39.560 --> 0:20:42.600 future relies on the stock market, and now it seems 0:20:42.600 --> 0:20:45.600 like I can lock in some real returns and then 0:20:45.960 --> 0:20:50.520 sleep easier exactly two year treasuries. Four am I am 0:20:50.520 --> 0:20:52.400 I off base here, Natalie mean, is this the case? 0:20:52.440 --> 0:20:55.000 I'm you know, I'm forty nine years old, happen to 0:20:55.040 --> 0:20:57.320 have a young kid, so I gotta I gotta work 0:20:57.359 --> 0:20:59.800 for the next at least twenty years. But is that 0:21:00.080 --> 0:21:01.920 the situation people my age are going to be in. 0:21:02.000 --> 0:21:04.920 Are they gonna start investing in fixed income and and 0:21:04.920 --> 0:21:07.720 not have to worry so much about the volatility of 0:21:07.720 --> 0:21:11.399 the stock market? Exactly, it's sleep at night. You can 0:21:11.400 --> 0:21:14.040 get five percent just and cupons alone. And if you 0:21:14.080 --> 0:21:16.760 actually do believe that that's gonna pivot and start cutting 0:21:16.840 --> 0:21:19.480 rates even next year, then you can have the positive 0:21:19.520 --> 0:21:22.959 total returns from declining interest rates and price appreciation on 0:21:23.040 --> 0:21:24.960 top of that five percent. So I think we're looking 0:21:24.960 --> 0:21:28.720 at mid single digit returns and credit this year and 0:21:28.760 --> 0:21:31.560 maybe high single digit to double digits in the years ahead. 0:21:32.400 --> 0:21:35.560 Are your portfolio managers are they kind of running recession 0:21:36.520 --> 0:21:38.879