Speaker 1: Hello, and welcome to What Goes Up, a weekly markets podcast.
Speaker 1: My name is Mike Reagan and I'm a senior editor
Speaker 1: at Bloomberg and this week on the show, despite lingering unemployment,
Speaker 1: the American consumer appears to be in pretty good shape.
Speaker 1: Betty Walton. Bank accounts are swollen from either government stimulus
Speaker 1: payments where the money saved from not leaving the house
Speaker 1: for very much during the pandemic. Well, what will these
Speaker 1: consumers spend it on? Has the pandemic changed spending habits
Speaker 1: permanently or were at least in the near future. We'll
Speaker 1: get into it with a portfolio manager and an analyst
Speaker 1: who covers the consumer, discretionary and industrial sectors. But first,
Speaker 1: Charlie Pelletts Halls, who this week's mystery co host is.
Speaker 1: This week's mystery co host is Chris nate Gee. Chris
Speaker 1: is a Boston guy at heart who's an executive editor
Speaker 1: from Markets in Bloomberg. That means he's actually Reagan's boss.
Speaker 1: So don't expect Mike to make any jokes about the
Speaker 1: Celtics performance in the playoffs this year, well, at least
Speaker 1: not on this episode of the podcast. Chris, Charlie's right
Speaker 1: I'm not gonna make any jokes about the Celtics. I
Speaker 1: will say I I hope you know you guys could
Speaker 1: have softened up the rest of the conference a little
Speaker 1: bit for us, But but no, you didn't really do that.
Speaker 1: I think we energize them. There's nothing funny to say
Speaker 1: about that serious move from from your perspective. There there,
Speaker 1: There's there's a lot to say from from us. But
Speaker 1: uh but Chris, as I put it on the intro,
Speaker 1: we have a great guest this week who knows a
Speaker 1: lot about consumer stocks and consumer behavior. Before we bring her,
Speaker 1: you know, I wanted to ask you about one thing
Speaker 1: that I know American consumers are spending a lot on
Speaker 1: these days, and that's the meme stocks and the doage
Speaker 1: coins in the world. The aisles are Bear that's right,
Speaker 1: the aisles of Bear of Beam. Sus, you and I
Speaker 1: have been through a lot of, let's face it, crazy
Speaker 1: market regimes together in this this job of ours, but
Speaker 1: I don't think we've ever seen anything like this that
Speaker 1: what we've seen in the past year. I'm just curious.
Speaker 1: You know, we haven't talked in Aboile. What's your take
Speaker 1: on this sort of new environment of day traders that
Speaker 1: we're seeing now. I mean, I guess it that goes
Speaker 1: to some degree the big day trading craze back in
Speaker 1: the day in the early two thousand's, But this seems
Speaker 1: to be something completely different. I mean, is is this
Speaker 1: just a permanent change do you think in the sort
Speaker 1: of makeup of the investor class, or is it just
Speaker 1: a fat I guess it remains to be seen if
Speaker 1: it's permanent. But you do have to say it's outlasted
Speaker 1: a lot of the predictions of its demise, Like there
Speaker 1: were a lot of sort of conventional wisdom ideas that
Speaker 1: it would run out when people went outside, or when
Speaker 1: sport events sports came back, like the Celtics Series M
Speaker 1: or the stimulus checks ran out. And right now you
Speaker 1: have to say, I mean, I think it is important.
Speaker 1: It's not quite the same absolutely uncorked craze that it
Speaker 1: was during the first go round. It seems like it's
Speaker 1: a little bit more selective now. They're they're honing it
Speaker 1: on their targets, maybe doing a better job of targeting
Speaker 1: company companies that sort of fit their model. But um,
Speaker 1: it's starting to seem like maybe it wasn't entirely a
Speaker 1: function of the of the lockdown, and what it was
Speaker 1: was the discovery of another way to crowdsource what people
Speaker 1: want in the world. And to that to that extent,
Speaker 1: you have to either worried or hope that it's permanent,
Speaker 1: depending on your side of the UH, which side of
Speaker 1: the trade you'ur on. It does seem like aspects of
Speaker 1: it are going to be tough to root out for
Speaker 1: or or just are going to be are gonna winger.
Speaker 1: I mean, there's just it just seems to be. It
Speaker 1: just seems to be working too well to be going
Speaker 1: to a quick death. I say, bring the retail courage
Speaker 1: commissions back and we'll get back to life as normal.
Speaker 1: But maybe I'm maybe I'm the outlier there, that's a
Speaker 1: fair point. There was a big this week. There's a
Speaker 1: big push at the SEC to to look at some
Speaker 1: of the market structure stuff that's underpinned this, so that
Speaker 1: certainly it's made UH commission free trading possible, like some
Speaker 1: of the you know, the market structured payment for order
Speaker 1: flows things, and maybe maybe if that gets un ended
Speaker 1: that some of the hysteria. I mean, certainly the ability
Speaker 1: to trade for nothing is a big part of what's
Speaker 1: UH what's driving it. I don't know that it's an
Speaker 1: absolutely necessary but it's certainly a facilitating influence on the
Speaker 1: whole thing, right, absolutely, Let's get to it then with
Speaker 1: our guests. As I said, she's a portfolio manager and
Speaker 1: an analyst. She covers the consumer, discretionary and industrial sectors
Speaker 1: at the investment firm Westwood. Her name is Lauren Hill. Lauren,
Speaker 1: welcome to the show. Thanks for having me here. I'm
Speaker 1: happy to be here. And and Lauren, much as I
Speaker 1: will not make any jokes about the Celtics, I'm not
Speaker 1: gonna make any jokes about you being a member of
Speaker 1: the Fuji. He's said. I wish I could sing to
Speaker 1: as much as I spelled differently, though, so at least
Speaker 1: I'm sure you wish you wish you'd never heard that before.
Speaker 1: I was gonna ask how many times you've heard that joke,
Speaker 1: but I'm sure it's it's daily at least. Uh kind
Speaker 1: of joke doesn't even doesn't even qualify as alright, alright.
Speaker 1: I lived in the city for eleven years, and Lauren,
Speaker 1: the real Lauren who lived in New Jersey, so people
Speaker 1: were always giving me updates when they'd see her on
Speaker 1: the street. They'd be like I saw her name to today,
Speaker 1: like it's really funny. Pride of New Jersey. We're very
Speaker 1: proud of her, I will say, though, she does have
Speaker 1: a reputation for being laid on stage. And you were
Speaker 1: right on time, so you got you got that uh
Speaker 1: distinction there too. But let me ask you about the
Speaker 1: whole notion of consumers. I think it's a great time
Speaker 1: to have you on the show because well, everybody is
Speaker 1: ready for the consumer to come roaring back now that
Speaker 1: the lockdowns are over. Everyone's vaccinated, and I want to
Speaker 1: ask you a little bit of kind of how you
Speaker 1: sort of suss out where you think the consumers going
Speaker 1: to go. And I'll tell you why. One of the
Speaker 1: big things that a lot of people were looking at
Speaker 1: during the pandemic was the various sort of alternative sets
Speaker 1: of data that we have available to us in real time.
Speaker 1: One thing that a lot of people looked at was
Speaker 1: open table restaurant reservations. And I get it as sort
Speaker 1: of the notion of as a macro indicator that the
Speaker 1: economy is reopening, people are more comfortable getting back out there.
Speaker 1: But to me, you know, I don't think I can't
Speaker 1: think a lot of public companies that actually have restaurants
Speaker 1: that need respirations too. So to me, my point being,
Speaker 1: and this is a long monologue to set up this question,
Speaker 1: but the point being that you know, do we know
Speaker 1: how the consumer is going to start spending this bankroll
Speaker 1: they have now? Um? Because I'm thinking if a lot
Speaker 1: of people create, say a fancy dinner out that has
Speaker 1: different implications obviously, then say people craving a chance to
Speaker 1: get back shopping at the malls or going to the movies.
Speaker 1: I'm just curious how you're analyzing the consumer in this
Speaker 1: reopening environment, um, And where do you expect that spending
Speaker 1: to be most robust? Yeah? Absolutely, So I'm really really
Speaker 1: positive on the consumer. I think we're going to have
Speaker 1: a really incredible rebound from here. I think the spending
Speaker 1: is going to surprise a lot of people, um, both
Speaker 1: in terms of the magnitude and how long it lasts.
Speaker 1: So UM. I think that the consumer the way I
Speaker 1: look at things is um, you know, kind of by generation.
Speaker 1: So UM. I think that we're gonna have a robust
Speaker 1: rebound in spending and that's going to be led by
Speaker 1: the boomers. I think that when you get down to
Speaker 1: the younger folks are going to be doing all kinds
Speaker 1: of different things. But just the group I spend a
Speaker 1: lot of time on is what I call the boomers
Speaker 1: plus that's people fifty five and older. So they only
Speaker 1: make up twenty percent of population, but they control over
Speaker 1: seventy percent of US wealth. So, um, you know, they
Speaker 1: were the most reluctant to get out during and now
Speaker 1: how they are returning to their old shopping patterns. And
Speaker 1: they've been adulting for a very long time, you know,
Speaker 1: in some cases fifty years, so they have really well
Speaker 1: established patterns of spending and they're getting back to it.
Speaker 1: Life is short. Um, they're putting family and friends and
Speaker 1: catching up with them as a high priority. I think
Speaker 1: that's gonna last two to three years. I think that's
Speaker 1: gonna boost travel. We're gonna see a lot of what
Speaker 1: I call social interaction spending. So we're gonna see hotel spending, vacations,
Speaker 1: people out of sit down restaurants. We're going to see
Speaker 1: a lot more services. There's tremendous pinet demand for services.
Speaker 1: We don't quite have the labor force back as we
Speaker 1: need them. There's still sixteen point nine million people on
Speaker 1: the sidelines collecting an employment right now. Before the pandemic,
Speaker 1: that was just two million, So, um, you know, the
Speaker 1: true unemployment rates probably still around ten percent. But I think,
Speaker 1: you know, as the federal bonus, the three a week
Speaker 1: extra that people are getting right now to help them
Speaker 1: get by, goes away the first week of September, I
Speaker 1: think we're gonna start to see, uh, and easing of
Speaker 1: that pressure in the labor market. More people are going
Speaker 1: to be out there, more services are going to be available.
Speaker 1: That's going to kind of ease the pressure on goods. Um.
Speaker 1: You know that people are so focused on spending on
Speaker 1: goods right now at the moment. But I think we're
Speaker 1: gonna get back to that natural balance, and I think
Speaker 1: boomers plus are going to lead us out of it.
Speaker 1: And um, you know, the younger folks, they don't have
Speaker 1: as well established patterns, especially those just out of college.
Speaker 1: So I really believe that, um, they're spending patterns may
Speaker 1: be affected for a very long time. You know. Um,
Speaker 1: in the last downturn, we talked about a lost decade.
Speaker 1: You know, it could kind of look like that, But
Speaker 1: kind of the big picture is they just don't have
Speaker 1: the spending power. In fact, Jen excellently has a third
Speaker 1: of the uh the wealth of UM the boomers and
Speaker 1: jin Jin y only has one. So even though they
Speaker 1: may spend more time at home, and they already were
Speaker 1: before the pandemic, which is I find really fascinating, they
Speaker 1: were already UM, kind of creating this home body economy.
Speaker 1: They had high student loans, they had you know, different
Speaker 1: pressures in their life. They were getting around to getting married,
Speaker 1: buying houses later in life, so they were already kind
Speaker 1: of willing to have more of a home life. And
Speaker 1: I think that's going to kind of continue. So different
Speaker 1: groups are going to do different things. But because of
Speaker 1: the you know, the I think boomers UM rule the
Speaker 1: world and I think that they're going to lead us
Speaker 1: out of this UM. The last interesting thing is UM.
Speaker 1: You know, the most recent data shows that seventy five
Speaker 1: percent of the boomers plus have had at least one
Speaker 1: shot from the COVID vaccine series. So I think that
Speaker 1: gives them a lot of confidence to really get out there.
Speaker 1: You know. The younger folks, UM, it's been more mixed,
Speaker 1: you know, just I don't think there's as much urgency.
Speaker 1: People are waiting to see if perhaps their schools are
Speaker 1: going to require it in the fall, you know, if
Speaker 1: they're in college and people are making all different kinds
Speaker 1: of choice is but you know, the older folks just
Speaker 1: felt a little more urgency. And I think that's a
Speaker 1: really healthy and great thing for the U. S. Economy.
Speaker 1: It's interesting. I live in downtown Manhattan. I actually live
Speaker 1: right next to Washington Square Park where you used to
Speaker 1: one used to notice and absolutely agree. I've lived around
Speaker 1: here for a long time, and when I was a kid,
Speaker 1: um the streets were pretty much mobbed all night, uh
Speaker 1: in this area, every every weekend night, certainly, And then
Speaker 1: for the last ten years it's really been like you
Speaker 1: could hear pin drop for most of the time. Part
Speaker 1: of part of it is that, you know, the rents
Speaker 1: and the houses here are now eleven million dollars no matter,
Speaker 1: no matter what. But another part of it I always
Speaker 1: thought was sort of people the kids are tapping into
Speaker 1: their phones and staring at their phones and interacting via
Speaker 1: things that don't require to go outside. I would just say,
Speaker 1: in the last three months, two months, you haven't seen,
Speaker 1: to put it mildly, the same reticence amongst the gen
Speaker 1: y and the zoom, the zoom general, the very young generation.
Speaker 1: They are outside in force at the moment. They will
Speaker 1: not let me sleep the party until three in the
Speaker 1: morning in Washington Square. Uh, they seem like they're very
Speaker 1: interested in getting back on outside. But I do know
Speaker 1: where you're coming from. I mean, um, who benefits from
Speaker 1: just the boomer trade. I mean there are there companies
Speaker 1: where this hasn't been priced in yet, is their industries,
Speaker 1: because it seems like a lot of stuff that's it's
Speaker 1: like the reopening because people have people have rooted it
Speaker 1: out and found it. At this point, anywhere the boomers
Speaker 1: direct they're spending. Uh, you know, they're gonna be big beneficiaries.
Speaker 1: So you know, we're seeing, um, what I call the
Speaker 1: social interaction categories are really getting a big lift right now.
Speaker 1: So um, you know, I'm seeing a tremendous momentum in retail.
Speaker 1: So um, you know, just a lot of the departments doors,
Speaker 1: the mall based retailers. You know, they really kind of
Speaker 1: let us out of um, you know, the the rebound
Speaker 1: and um, you know out of uh last year following
Speaker 1: the vaccine announcements in November, So that group has been
Speaker 1: really strong. Anything associated with travel, car rentals, uh, you know,
Speaker 1: anything associated with services, and you know, a lot of
Speaker 1: those stocks have moved quite a bit. So um, really,
Speaker 1: what I love so much is that we're really entering
Speaker 1: what I considered be a stock pickers market. Um, that's
Speaker 1: really where you know, firms like mine, like Westwood shine.
Speaker 1: So I'm really looking forward to many years of just
Speaker 1: a really healthy market where we're really focused on the
Speaker 1: fundamentals and you know, we have this really healthy, um,
Speaker 1: long lasting spend backdrop. So one of the other things
Speaker 1: I think people are overlooking, what I think consensus is that, Okay,
Speaker 1: we had the stimulus checks. You know, we just got
Speaker 1: checks the last round. You know, we've had over two
Speaker 1: grand given out to you many many UM families and
Speaker 1: that's wonderful, but um, you know, it's kind of one
Speaker 1: and done, and I actually think it's going to be
Speaker 1: more sustained. So we're having a tremendous positive wealth effect.
Speaker 1: And so both the stock markets up double digits, home
Speaker 1: valuations are up double digits as well, and people just
Speaker 1: feel wealthier. They've saved quite a bit um. You know
Speaker 1: in many cases, you know, obviously there's um the last
Speaker 1: year was hard for everyone in different ways, and some
Speaker 1: people you know, went through job loss and transitions. But
Speaker 1: by and large, a lot of people made it through,
Speaker 1: especially the oldest generation like the Boomers plus made it
Speaker 1: through relatively unscathed. So I think that, um, you know,
Speaker 1: they're they are ready. There's all those areas where there's
Speaker 1: pent up demand are going to continue to benefit and
Speaker 1: the spending is going to be orderly. I don't think
Speaker 1: it's gonna be so quick, um in goods and services
Speaker 1: that it's going to force the fence hand and we're
Speaker 1: gonna have to raise rates. You know, that's my personal opinion.
Speaker 1: I know that everyone kind of falls, you know, a
Speaker 1: the spectrum in different places with different views on that.
Speaker 1: But um, I think that if any area starts to
Speaker 1: have too much inflation, then I think that people are
Speaker 1: very rational and they're gonna take their tremendous savings and
Speaker 1: they're gonna spend it in different categories that are more compelling.
Speaker 1: So right now, the savings um is just over six
Speaker 1: trillion dollars in the US, So that's four point three
Speaker 1: trillion more than we had going into the pandemic. So
Speaker 1: that's gonna take a long time to spend down, and
Speaker 1: I think it will be fairly orderly. I think people
Speaker 1: are going to take their time catching up with folks
Speaker 1: and enjoying their lives. And um, you know, I'm seeing
Speaker 1: it in fashion too. There's just so many exciting fashion
Speaker 1: trends coming. I think people are really ready to be
Speaker 1: happy again. Uh. The summer, it's all about the bright colors.
Speaker 1: I don't know if you've been to the mall lately,
Speaker 1: but it is just, uh, you know, it looks like
Speaker 1: it was attacked by a highlighter. Um it was you
Speaker 1: know you see me on girl means and electric blues, corals,
Speaker 1: a big color hot pink, uh, you know, and just oranges.
Speaker 1: And people are ready to see and be seen again. Um.
Speaker 1: Also for the fall, I was really excited to see
Speaker 1: um the fall fashion. Lots of crazy patterns coming in
Speaker 1: the fall. Just very interesting to look at something that
Speaker 1: will catch the eye. And uh, I think that people
Speaker 1: have been staring at the four walls of their home
Speaker 1: for such a long time. They're just ready for variety,
Speaker 1: and I think that's coming. It's a great perspective, Lauren,
Speaker 1: because as you might be able to uh determine from
Speaker 1: looking at Chris and I, we don't know much about fashion.
Speaker 1: I don't hear it but I wonder if fact that color,
Speaker 1: that colors thing could be a good indicator, you know,
Speaker 1: like the old hemline indicator they talk about if people
Speaker 1: are in a fashion very bright and colorful fashion mode,
Speaker 1: maybe maybe that that's a bullish sign. Um. I also,
Speaker 1: I'm glad you're giving some props to the boomers, that
Speaker 1: the group that does not get a lot of props
Speaker 1: these days from the younger generation. I'm personally not a boomer.
Speaker 1: I am accused of being one a lot on social media.
Speaker 1: I'm not gonna speak for Chris. He might be yes, yes,
Speaker 1: very I may be a little bit on the boomer
Speaker 1: spectrum with at least it was musical to taste, I
Speaker 1: will say, and perhaps perhaps fashion taste to kikkokies and
Speaker 1: and whatnot. But I want to ask also about the
Speaker 1: industrial So I know you follow industrials as well, Um,
Speaker 1: and there was a lot of sort of enthusiasm towards
Speaker 1: the industrial sector earlier this year. Now it's looking like, um,
Speaker 1: the infrastructure bill is probably not going to necessarily go
Speaker 1: anywhere in Congress. I mean, is there enough um sort
Speaker 1: of juice in the economy to be excited about the
Speaker 1: industrial sector as well, or is this, you know case
Speaker 1: closed a consumer dominated sort of market story from a
Speaker 1: sector perspective. In your opinion, I am excited about the
Speaker 1: consumer and what I'm seeing, you know, specifically within retail um.
Speaker 1: You know, especially for businesses that have the strongest brands,
Speaker 1: the deepest pockets, they can invest in omni channel. You know,
Speaker 1: I think that's all a great opportunity. Looking over at
Speaker 1: the industrials, uh, you know, I think that there's room
Speaker 1: for excitement as far as there's some new technologies coming out,
Speaker 1: and you know, anytime a company has you know, some
Speaker 1: new great patents, some new product lines, they can grow.
Speaker 1: I just think that there's kind of a limit or
Speaker 1: a cap on how quickly that can grow. You know.
Speaker 1: We we have the infrastructure that we have, and you know,
Speaker 1: there's a limit to what full production looks like for US,
Speaker 1: and over time, the US has made less, you know,
Speaker 1: and so that just um, you know, everyone wants to
Speaker 1: get as much as they possibly can on the shelves.
Speaker 1: Companies that have been running at all time low inventories
Speaker 1: and seeing that across a number of subsectors, you know,
Speaker 1: are very nervous in the the business um, the leaders
Speaker 1: want to you know, keep a little extra. It's not
Speaker 1: just about just in time anymore. They want to have
Speaker 1: a little um more inventory than they have. So I
Speaker 1: think we're gonna have some restocking, and that's you know,
Speaker 1: a very positive thing. But you know, just from my
Speaker 1: view also the evaluations there are more full in my
Speaker 1: opinion in general, so it's just slimmer pickings and industrials.
Speaker 1: I just tend to see more opportunity on the consumer
Speaker 1: discusitionary side. And I find that that you're you're very
Speaker 1: sanguine attitude here. I mean, it's great to hear. It's, uh,
Speaker 1: thank god, somebody is so optimistic about the world, except
Speaker 1: where people. I also have to say it does not
Speaker 1: exactly accord with my view of what the life of
Speaker 1: an equity analyst must have been like over the last year.
Speaker 1: Like I know that your wild to your resume and
Speaker 1: you did a lot of value work, which I think
Speaker 1: is like the only really defensible approach to to security analysis.
Speaker 1: But I also have to think, I mean, you're in
Speaker 1: charge of retail names, many of them must have been
Speaker 1: by definition playing around near bankruptcy levels over the last year,
Speaker 1: and now you're a sensible logic bearing analyst value value
Speaker 1: analysts dealing with the market where God knows what is
Speaker 1: coming for you. I mean, let's face a lot of
Speaker 1: the meme stocks have been aimed at vaguely consumer Jason,
Speaker 1: I mean not necessarily legitimate and viable consumer facing names,
Speaker 1: but a lot of their interests has been in that
Speaker 1: near that space. I just feel like I would be
Speaker 1: hold up with the security blanket and a pacifier in
Speaker 1: a locked room somewhere if I had your job. What's
Speaker 1: it been like. I mean, that's Christmas Foster with his
Speaker 1: job too. By the way, Yeah, I do that. I
Speaker 1: do that regardless, I'm doing that now. No good to know.
Speaker 1: I totally hear you, but I guess just you know,
Speaker 1: from my view, I actually thought was fascinating. You know,
Speaker 1: my heart went out to UM everyone who had hard
Speaker 1: times throughout you know, lots of families did, lots of
Speaker 1: people were affected. But as far as the market goes,
Speaker 1: it was absolutely fascinating because it was a recession unlike
Speaker 1: any other half of my companies did better than ever
Speaker 1: and you know, had high high demand. People were focused
Speaker 1: on their home, you know, uh, furniture and UM, getting
Speaker 1: prepared for work at home, doing school from home. You know,
Speaker 1: there was tremendous amount of spending that went into all
Speaker 1: of that. And at the same time, you know, no
Speaker 1: one was buying suits, no one was um, you know,
Speaker 1: buying structured clothes or um for formal gowns or you know,
Speaker 1: going to events. All of that just dried up overnight.
Speaker 1: UM And luckily, UM, you know, I spent a number
Speaker 1: of years on the hedge fund side of the business,
Speaker 1: and you gush, you really have to babysit your shorts
Speaker 1: and spend so much time on those and that would
Speaker 1: have uh, you know, just been so hard this past year.
Speaker 1: But luckily Westwood causes long only for the long term,
Speaker 1: and we we invested the intersection of quality and value,
Speaker 1: and so we really tend to be very very careful
Speaker 1: and the risk that we take. You know, that's the
Speaker 1: first analysis we all do before we look at the
Speaker 1: upside potential, and we spend um hours and hours vetting
Speaker 1: each other's ideas as a team before they even go
Speaker 1: on the approvals to buy. So we tend to uh,
Speaker 1: we actually did exceptionally well throughout and um our analysts
Speaker 1: know their sectors so so well, you know, they could
Speaker 1: kind of see around the corners and know what was
Speaker 1: coming and make educated guesses on you know, what the
Speaker 1: future would be like. And they were talking to you know,
Speaker 1: all of the UH teams and management teams and listening
Speaker 1: to all the calls. So I felt like we had
Speaker 1: a really good read and it was very apparent to
Speaker 1: us like places to completely avoid and others, you know,
Speaker 1: to spend more time on. Wow, could this really be
Speaker 1: a good opportunity? So, um, we sidestepped a lot of
Speaker 1: the headache, but yeah, it was just a really wild
Speaker 1: gear or I mean, it just felt like you couldn't
Speaker 1: get off the roller coaster. You couldn't get away from
Speaker 1: your screens. You know. I remember back in um, you know,
Speaker 1: February March o nine, just standing at my desk. I
Speaker 1: couldn't even sit, you know, just the markets were dropping
Speaker 1: so quickly and just how rapidly everything developed. It was
Speaker 1: just incredible. But you know, and I think the important
Speaker 1: thing to focus on now is just the future outlook
Speaker 1: from here, and to me that seems really bright. Speaking
Speaker 1: of great UH, Lauren, and I will say one thing, Um,
Speaker 1: we have a lot of sort of macro top down
Speaker 1: type of guests on here, which are they're always fascinating
Speaker 1: and brilliant, But I really like it when we get
Speaker 1: a bottoms off type of person like yourself. And I
Speaker 1: know I've I've got a few stocks here that I
Speaker 1: know I've caught your I So if we could just
Speaker 1: go through quickly, Uh, what you like about one hundred Flowers,
Speaker 1: Halloway Golf and Ross stores. I think I said some
Speaker 1: one of them had stop boomer themed to the Calloway Golf,
Speaker 1: but uh, maybe one eight hundred Flowers has that sort
Speaker 1: of break and sunny outlook that you're embracing. But walk
Speaker 1: us through. What's got you excited about those stuffs? Yeah? So, um, yeah,
Speaker 1: wedding hundred Flowers is, um, you know, just a fantastic company.
Speaker 1: They are really really good at customer service. They have
Speaker 1: number one market share in e gifting and you know,
Speaker 1: it was a COVID winner. You know, we'd owned it
Speaker 1: before the pandemic ever happened, but um and all throughout.
Speaker 1: But the reason we continue to hold it and love
Speaker 1: the stock is that, um, you know, they've really tapped
Speaker 1: into an entirely new customer base, both at the high
Speaker 1: end in the low end. So baby boomers who had
Speaker 1: done all of their gifts shopping in person before the pandemic.
Speaker 1: A lot of them tried out one at hundred for
Speaker 1: the first time, and instead of buying say a fifteen
Speaker 1: or twenty dollar house plant and sending it to someone,
Speaker 1: they went for the two indre dollar orchids because they could.
Speaker 1: And it's just higher margin, better business, and so the
Speaker 1: new customers coming in were higher quality than the customer
Speaker 1: base they already had. Their retention is over n and
Speaker 1: so just being able. Um, I think there was a
Speaker 1: lot of skepticism that they could hang onto those customers
Speaker 1: leaving the pandemic, but um, you know, they have this
Speaker 1: wonderful program. It's called the Passport program, and you spend
Speaker 1: twenty dollars a year and you get all these all
Speaker 1: the all these benefits, including free shipping, and so people
Speaker 1: get their address books and there. It's very sticky business
Speaker 1: and so they've really done a great job with that.
Speaker 1: At the same time, they bought pe mall from bed
Speaker 1: Bath and Beyond for a song. Um the you know,
Speaker 1: it wasn't core for bed Bath and Beyond, and so
Speaker 1: they really knew what to do with it. And personalization
Speaker 1: um on coffee megs and mouse pads and all that
Speaker 1: stuff is just really popular. It's growing double digits and
Speaker 1: that's gonna lead to an increasing their IBADAM margin over time,
Speaker 1: probably over and UM, it's just this wonderful business. So
Speaker 1: I think that they have a long runway of growth
Speaker 1: ahead of them. UM callawe golf. As you said, it
Speaker 1: is kind of a boomer play. So people who retire
Speaker 1: UM tend to play golf twice as often as the
Speaker 1: average golfer. And so the boomers are retiring in force
Speaker 1: and they're getting out there on the golf course. At
Speaker 1: the same time, we have the Olympics coming up. UM
Speaker 1: golf was out of the Olympics forever a hundred years
Speaker 1: and it just came back in. So we're gonna have
Speaker 1: it back again for the Olympics, you know, this year,
Speaker 1: and so that's going to be exciting to see. Um,
Speaker 1: we have a lot of new young pros that are
Speaker 1: out there. There's a new programs for both UM, young
Speaker 1: men and young women to play golf. You know, it's
Speaker 1: starting younger and younger, so you can get into a
Speaker 1: high school program where a couple of decades ago, you know,
Speaker 1: that really wasn't a thing. And so I think that UM,
Speaker 1: you know, golf turns are gonna remain really strong. UM
Speaker 1: participation is at record levels, and also first time golfers
Speaker 1: or new golfers are at record levels, So we're seeing
Speaker 1: this massive inflow and once people learn something new, I
Speaker 1: think the future UM leaving the pandemic is going to
Speaker 1: be the everyone's gonna live their best life, so whatever
Speaker 1: that means to them, whether that means more of the stone,
Speaker 1: we're going to hang onto some of those habits or
Speaker 1: if they're gonna, you know, kind of go back to
Speaker 1: their twenty nineteen ways, they're gonna pick and choose what
Speaker 1: works best for them and for people to learn golf.
Speaker 1: I think that people really enjoy it. It's a safe
Speaker 1: way to socialize UM and you know, it's really enjoyable.
Speaker 1: So I think that UM as more people have four
Speaker 1: hours to kill, they're going to get out there and
Speaker 1: catch up with each other and continue to play rounds.
Speaker 1: And the last element of that is UM, you know,
Speaker 1: just the tremendous opportunity that they have with Top Golf.
Speaker 1: They're going to expand that globally. They're going to franchise internationally.
Speaker 1: They're going to grow their U S space by subveral
Speaker 1: hundred stores, over the next um nine years, and so
Speaker 1: they have a huge opportunity there. And then they have
Speaker 1: this kind of free option. They said they want to
Speaker 1: be the Pelotono Golf. So for you to be able
Speaker 1: to take your cell phone, scan your your golf swing
Speaker 1: at a you know, hotel, maybe you're off at a
Speaker 1: conference or something from anywhere anytime, and get real time
Speaker 1: feedback on your swing and how to improve. UM. I
Speaker 1: think that's you know, an opportunity for them, UM you know,
Speaker 1: and I don't have any of that priced in, but
Speaker 1: I think that that could be a big opportunity for
Speaker 1: them in the future. And UM, the last one Ross stores. UM,
Speaker 1: it's just this incredible UM free cash flowgenerative business. UM.
Speaker 1: It's steady through recessions, it's does really well in recoveries.
Speaker 1: So virtually all of their stores were closed a year ago.
Speaker 1: That makes forecasting the reopening extremely difficult. UM. You know,
Speaker 1: they are a California based company that continues to expand
Speaker 1: into the Midwest and eventually um more to the East coast,
Speaker 1: UM towards you know, where their competitors competitors are, and
Speaker 1: so they have UM they're one of the few retailers
Speaker 1: that's able to open uh a hundred stores a year
Speaker 1: and UM continue to grow that way. Their their comps
Speaker 1: are very positive and what what's so different about them
Speaker 1: is they look out at all of the dislocations that
Speaker 1: are happening in the market. Retails really sped up a lot,
Speaker 1: the supply chains have gotten a lot faster, but that's
Speaker 1: leading to a lot of mistakes by the full price sellers,
Speaker 1: and so they end up with boxes of clothes and
Speaker 1: they don't have anything to do with them. It's like, oh, no,
Speaker 1: this isn't on trend, or you know, I can't put
Speaker 1: this out in the stores, or I have too much.
Speaker 1: So they call Ross stores and they say, hey, will
Speaker 1: you take this off my hands? And so they get
Speaker 1: to survey everything available, take the very best of it UM,
Speaker 1: you know, kind of mix it like a seal, at
Speaker 1: a unique mix for every single store in the country.
Speaker 1: They have very sophisticated systems that do just that and
Speaker 1: sell it at a discount to what the brand would
Speaker 1: usually sell for. And people really do want UM more
Speaker 1: for less. They're in a mindset to kind of save
Speaker 1: money and you know, get good value for they're spending.
Speaker 1: And that's just a wonderful way to do it. And
Speaker 1: also the last year people just haven't had that treasure
Speaker 1: hunt experience, so they're really excited to get back out
Speaker 1: there and shop at a Ross store. And you know,
Speaker 1: we think the business is going to do very, very
Speaker 1: well long term. You know, I learned I can relate
Speaker 1: to those retiree golfers because I play an average amount
Speaker 1: of golf, but I take twice as many strokes as
Speaker 1: most people. You know, it's kind of the same thing.
Speaker 1: I mean, you like that one, Chris, that's an excellent one.
Speaker 1: Maybe your best of the deck. One of them had
Speaker 1: to be right. It's just a little bar stand clear
Speaker 1: of the craziest things we saw in markets this week. Well,
Speaker 1: speaking up best of the day, I think it's time
Speaker 1: for the segment that many people look forward to as
Speaker 1: the best of what goes up here, and that is
Speaker 1: the craziest things we saw in markets this week. Lauren,
Speaker 1: hopefully they warned you about this gimmick. Not a gimmick,
Speaker 1: not a gimmick, tradition, tradition of ours. And you can't prepare.
Speaker 1: But Chris, I know you can't prepare. What is the
Speaker 1: craziest thing you saw this week? I have to say,
Speaker 1: as somebody who's overseen about ninety million stories about the
Speaker 1: looming threat of inflation to the market and to everything
Speaker 1: else over the last two months. The sight of the
Speaker 1: ten year note going down below one fifty on the yield. Really,
Speaker 1: I'm not generally a bond guy, so I'm basically like
Speaker 1: looking and kind of gawking and disbelief at everything that
Speaker 1: goes on in that market. But that one of all
Speaker 1: of the non consensus things to happen in the last
Speaker 1: little while, and there's been a lot of them, that
Speaker 1: really strikes me as the craziest, certainly the craziest thing
Speaker 1: I've see. I go, we woke up and there was
Speaker 1: a bunch of a werts on the terminal showing it
Speaker 1: going below one fifty and being the lowest and two months,
Speaker 1: And I'm like, is this another instance of me not
Speaker 1: understanding the way bond yields move? But alas no, they
Speaker 1: continue to uh and and the part of the bond
Speaker 1: market that usedes a proxy for inflation and break even,
Speaker 1: but clearly the concerns about eating price pressures, etcetera, and
Speaker 1: all these things we're supposed to derail, basically everything have
Speaker 1: just dried up. And I I feel like there's a
Speaker 1: probably a lot of good stories to be written on
Speaker 1: why that's going on, because we've written all of the
Speaker 1: possible stories, literally all of them in the universe about
Speaker 1: why Bonn yields were heading to two and three and four,
Speaker 1: and not that many of them even contained like the
Speaker 1: to be sure sections that could fall between fifty. But
Speaker 1: I mean, I guess it's not great news for uh
Speaker 1: people who read sort of demand for money as kind
Speaker 1: of a growth proxy. And I guess it is good
Speaker 1: news if you're worried that inflation is going to come
Speaker 1: tear tear all of the houses down. But um, yeah,
Speaker 1: that one was a bit of a nutso head scratcher
Speaker 1: for me. I'm still trying to get my mind around
Speaker 1: what's going on there. Yeah, agreed, I haven't seen any
Speaker 1: real believable explanations were it either. I mean, it's not
Speaker 1: like we were for Financial News Service. I think maybe
Speaker 1: the Wall Street that's crowd found out there were shorts
Speaker 1: in the bond market. That's my that's my theory. Oh
Speaker 1: my god, it's all your plans for the next week, Lauren.
Speaker 1: How about you, what's the craziest thing you saw this week?
Speaker 1: The craziest thing I saw this week was the Gap
Speaker 1: sold out in three hours of a puffer jacket that
Speaker 1: they released yesterday. Jacket, Yes in the in the middle
Speaker 1: of June. It was the Kanye West collaboration and it
Speaker 1: was electric blue. It was this very vibrant, bright color.
Speaker 1: Puffer jackets are actually going to be really big for
Speaker 1: the fall. But just the speed at which it sold out,
Speaker 1: What a great collaboration for the Gap. You know that
Speaker 1: brand's really struggled over a very long period of time,
Speaker 1: but the collaborations have been, um, you know, just a
Speaker 1: shot in the arm for them, and it's really good
Speaker 1: to see that. So um you know, I think that
Speaker 1: turned a lot of heads. I was really surprised. Did
Speaker 1: you buy one, Mike? Well, Chris, I was gonna say,
Speaker 1: it's good intelligence for me because I've been dieting and
Speaker 1: now if I know that puffer jackets are gonna be
Speaker 1: big in the fault, what's the point No one will
Speaker 1: be able to tell anyway. I can just wear my
Speaker 1: puffer jacket. Everyone, you look great, great, thanks Chris. All right,
Speaker 1: Well that's a good one. I uh, you know, I
Speaker 1: saw that. I saw the Kanye West puffer jacket thing,
Speaker 1: and I was, and I hadn't thought of a market
Speaker 1: t angle, but you got you got it right there
Speaker 1: with the gap. I wonder if the gap price is
Speaker 1: reacting to that. I don't know. I'll have to check
Speaker 1: the trusty Bloomberg see if people are are loading into
Speaker 1: the gap shares because of the Kanye puffer jacket. That
Speaker 1: that would truly be a crazy thing for all of us.
Speaker 1: But all right, I'm going to dip into my favorite
Speaker 1: UH space, which is the alternative asset class. And and
Speaker 1: this is when I say alternative, I really be an alternative.
Speaker 1: And you might not even argue that this has nothing
Speaker 1: to do with markets, but I'll tell you why it does. Chris.
Speaker 1: As you know, I've been editing a lot of Joe
Speaker 1: wisen Ball lately, and he always uses the notion of
Speaker 1: the funding for a whaling expedition as sort of the
Speaker 1: original base case for capital markets. You know, you lay
Speaker 1: off the risk of not getting any whales through investors. Anyway,
Speaker 1: It's a bit of a stretch, but but hear me out,
Speaker 1: and I'm gonna read a headline from the New York Post.
Speaker 1: I'll read the lead of a story from a New
Speaker 1: York Post it's about a whaling expedition uh in the
Speaker 1: Middle East. I believe it was. Where was it? Um
Speaker 1: off the coast of Yemen. Fisherman catch two pounds chunk
Speaker 1: of whale vombit worth one point five million dollars. So
Speaker 1: why you might ask who a chunk of whale vombit?
Speaker 1: You were one point five million, which is a valid question.
Speaker 1: I thought it was going in a museum somewhere, or
Speaker 1: maybe someone made an n f T out of it
Speaker 1: or something. But apparently this piece of of whale vomit
Speaker 1: is so valuable because it contains uh, something that's known
Speaker 1: as and I'm totally gonna mispronounce it here, um, but
Speaker 1: I will try to pronounce it. Let me just find
Speaker 1: it in the story here. Um. I'm really not as
Speaker 1: prepared as I should be for this segment. Um anyway,
Speaker 1: amberg ambergriss, ambergriss. And the reason ambergriss is so expensive, ironically,
Speaker 1: is because it's used in perfume. Um. It's an odorless
Speaker 1: alcohol that makes fragrances last longer. And the whalers were
Speaker 1: drawn to this whale by um an overpowering scent of
Speaker 1: fecal matter. This is according to the New York Post here,
Speaker 1: so you're drawn. You're drawn to a whale with an
Speaker 1: overwhelming scent of fecal matter. To get this material out
Speaker 1: of the guts of the whale. That is priceless for
Speaker 1: for fume makers because it's odorless. A lot to wrap
Speaker 1: your head around this story, and that's why it's the
Speaker 1: craziest thing I saw. But that is all I got
Speaker 1: on that story. I think we've all heard enough about
Speaker 1: that story. But Chris and Lauren, that's all the time
Speaker 1: we have this week. Thank you so much, great conversation,
Speaker 1: and Lauren, you've you've raised my my optimism level greatly
Speaker 1: because absolutely I agree. I feel much better. Sensible people
Speaker 1: are back in charge. Well good. Thank you so much
Speaker 1: for hosting What Goes Up. Will be back next week
Speaker 1: and something. You can find us on the Bloomberg Terminal
Speaker 1: website and app or wherever you get your podcasts. We'd
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Speaker 1: find us, and you can find us on Twitter, follow
Speaker 1: me at Rea Anonymous, Chris nag Is at Chris nag One.
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Speaker 1: is produced by Tofur Fourheads. The head of Bloomberg Podcasts
Speaker 1: is Francesco Leaving. Thanks for listening, See you next time.
Speaker 1: Thing