1 00:00:02,920 --> 00:00:10,799 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the 2 00:00:10,840 --> 00:00:15,040 Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am 3 00:00:15,040 --> 00:00:18,040 Speaker 1: Eastern on Apple, Cardplay and Android Auto with the Bloomberg 4 00:00:18,079 --> 00:00:21,400 Speaker 1: Business App. Listen on demand wherever you get your podcasts, 5 00:00:21,640 --> 00:00:24,000 Speaker 1: or watch us live on YouTube. 6 00:00:25,040 --> 00:00:27,040 Speaker 2: All right, let's get to the bond market for a moment. 7 00:00:27,080 --> 00:00:28,880 Speaker 2: It's been a really interesting a couple of days. So 8 00:00:28,960 --> 00:00:30,800 Speaker 2: yesterday you had a lot of buying on the front end, 9 00:00:30,800 --> 00:00:32,640 Speaker 2: and you had some selling on the back end. Today 10 00:00:33,159 --> 00:00:37,120 Speaker 2: buying pretty much across the board. It's really that Bull 11 00:00:37,320 --> 00:00:40,120 Speaker 2: Flattner that we're seeing joining us now as Ira Jersey. 12 00:00:40,280 --> 00:00:43,920 Speaker 2: He's chief US interest rate strategist over at Bloomberg Intelligence. 13 00:00:44,120 --> 00:00:47,199 Speaker 2: First question goes back to yesterday. Was the long end 14 00:00:47,240 --> 00:00:50,920 Speaker 2: selling a reaction to like needing to liquidate to cover 15 00:00:51,040 --> 00:00:51,879 Speaker 2: shorts in the end? 16 00:00:53,320 --> 00:00:55,160 Speaker 3: Well, I don't know if it was only the en 17 00:00:55,240 --> 00:00:56,920 Speaker 3: it was also that a lot of people wanted to 18 00:00:56,960 --> 00:00:59,440 Speaker 3: get into the front end because of the idea that 19 00:01:00,160 --> 00:01:03,240 Speaker 3: you know, we'd see deeper interest rate cuts and and 20 00:01:03,280 --> 00:01:05,240 Speaker 3: because of that, you have to if you're a real 21 00:01:05,240 --> 00:01:07,280 Speaker 3: money investor, you have to raise that money from somewhere 22 00:01:07,360 --> 00:01:09,920 Speaker 3: because you might not have all of the all of 23 00:01:09,920 --> 00:01:11,880 Speaker 3: that in cash, so you have to sell something to 24 00:01:12,360 --> 00:01:16,160 Speaker 3: to fund your your purchases in the front end. I 25 00:01:16,160 --> 00:01:18,280 Speaker 3: think part of it too was you had a decent, 26 00:01:18,800 --> 00:01:22,080 Speaker 3: a decent five year auction, and so you had some 27 00:01:22,120 --> 00:01:25,400 Speaker 3: people who were saying, you know, again buying the belly 28 00:01:25,400 --> 00:01:27,679 Speaker 3: and the front end and you know, selling the back end. 29 00:01:27,720 --> 00:01:30,280 Speaker 3: And then secondly, and this was really interesting, is that 30 00:01:30,319 --> 00:01:32,679 Speaker 3: there were some people who maybe were hoping and dealers 31 00:01:32,720 --> 00:01:36,199 Speaker 3: who were hoping to get rid of some inventory into 32 00:01:36,400 --> 00:01:40,600 Speaker 3: the a treasury buyback that occurred yesterday, and the Treasury 33 00:01:40,600 --> 00:01:43,200 Speaker 3: didn't buy anything. They were you know, people were expecting 34 00:01:43,200 --> 00:01:46,480 Speaker 3: them maybe to buy about a billion dollars worth of 35 00:01:46,680 --> 00:01:49,040 Speaker 3: seven to ten year notes and they didn't buy any 36 00:01:49,120 --> 00:01:52,600 Speaker 3: because I guess that sector was rich. So when you 37 00:01:52,640 --> 00:01:55,640 Speaker 3: didn't have that, dealers have more more inventory than they 38 00:01:55,680 --> 00:01:58,880 Speaker 3: thought and basically had to you know, back up their 39 00:01:58,880 --> 00:02:00,480 Speaker 3: prices and that means higher yields. 40 00:02:01,280 --> 00:02:04,080 Speaker 4: I right, we had that really strong GDP print this morning. 41 00:02:04,480 --> 00:02:06,960 Speaker 4: Tom Kane was making the point earlier this morning that 42 00:02:07,000 --> 00:02:10,120 Speaker 4: how can a FED cut into something like that? Economy 43 00:02:10,120 --> 00:02:11,400 Speaker 4: doesn't need it right now? What do you think? 44 00:02:12,440 --> 00:02:15,040 Speaker 3: Yeah, Well, it's it's a momentum issue, right, because keep 45 00:02:15,120 --> 00:02:18,160 Speaker 3: in mind that that the third quarter, the second quarter 46 00:02:18,200 --> 00:02:21,560 Speaker 3: GDP report was for April, May and June. So April 47 00:02:21,560 --> 00:02:24,240 Speaker 3: and May, we know were reasonably strong, and and you know, 48 00:02:24,320 --> 00:02:27,120 Speaker 3: clearly you know June wasn't terrible by any stretch of 49 00:02:27,120 --> 00:02:30,919 Speaker 3: the imagination. Economic momentum is slowing, so at some point 50 00:02:31,360 --> 00:02:34,040 Speaker 3: the Federal Reserve might cut interest rates. But I agree 51 00:02:34,080 --> 00:02:36,080 Speaker 3: with the idea that you know that, And we've always 52 00:02:36,120 --> 00:02:40,240 Speaker 3: been skeptical about the about a September cut being the 53 00:02:40,280 --> 00:02:42,720 Speaker 3: first one, And again I don't really care. I think, 54 00:02:42,760 --> 00:02:45,440 Speaker 3: big picture, if it's the September's the first cut, in 55 00:02:45,520 --> 00:02:48,600 Speaker 3: November's the first cut, doesn't really matter at least unless 56 00:02:48,600 --> 00:02:52,800 Speaker 3: you're trading instruments that it happened to mature in those months. 57 00:02:53,040 --> 00:02:55,400 Speaker 3: So yeah, I think I think it is difficult, and 58 00:02:55,480 --> 00:02:58,200 Speaker 3: it just shows and what this report shows is that 59 00:02:58,280 --> 00:03:01,320 Speaker 3: the economy, while it's not where it was a year ago, 60 00:03:01,560 --> 00:03:04,360 Speaker 3: it's still not weak. And and that's the that's the 61 00:03:04,440 --> 00:03:06,880 Speaker 3: challenge that the Fed has is how can they cut 62 00:03:07,000 --> 00:03:10,040 Speaker 3: while the until the economy is actually weak, And you 63 00:03:10,160 --> 00:03:12,160 Speaker 3: just don't see that very much, even with four point 64 00:03:12,160 --> 00:03:15,160 Speaker 3: one percent unemployment that's not crazy high end employment by 65 00:03:15,200 --> 00:03:16,320 Speaker 3: any stretch of the imagination. 66 00:03:16,480 --> 00:03:18,480 Speaker 2: So based on that, what what kind of curve do 67 00:03:18,520 --> 00:03:20,680 Speaker 2: we expect, as in, is it going to be buying 68 00:03:20,680 --> 00:03:22,120 Speaker 2: the front end or is it going to be selling 69 00:03:22,200 --> 00:03:22,680 Speaker 2: the long end? 70 00:03:23,720 --> 00:03:27,079 Speaker 3: Well, eventually it's going to be I think a bull steepener. 71 00:03:27,160 --> 00:03:29,000 Speaker 3: So that means that front end yields are going to 72 00:03:29,040 --> 00:03:33,239 Speaker 3: go down much faster than longer term yields. But it's 73 00:03:33,400 --> 00:03:35,040 Speaker 3: you know, that's it that's going to come and fits 74 00:03:35,080 --> 00:03:37,560 Speaker 3: and starts because of the same reason that we've seen 75 00:03:37,600 --> 00:03:40,360 Speaker 3: it the last couple of quarters quite frankly, and that's 76 00:03:40,360 --> 00:03:42,440 Speaker 3: what we don't know when the fed's going to start. 77 00:03:42,520 --> 00:03:44,840 Speaker 3: And once the FED starts, then the question is how 78 00:03:45,120 --> 00:03:47,440 Speaker 3: how fast do they go? And we've been on the 79 00:03:47,480 --> 00:03:52,520 Speaker 3: opinion at at b I rates that we're that the 80 00:03:52,600 --> 00:03:55,040 Speaker 3: longer the FED waits to cut, the deeper. 81 00:03:54,760 --> 00:03:55,760 Speaker 5: It's going to have to cut. 82 00:03:55,800 --> 00:03:58,200 Speaker 3: And and and we do think that you know, they 83 00:03:58,200 --> 00:04:01,440 Speaker 3: are going to cut probably once this year, maybe twice. 84 00:04:01,840 --> 00:04:04,240 Speaker 3: Once they do, they'll keep on going and keep cutting 85 00:04:04,280 --> 00:04:06,480 Speaker 3: at least one hundred and fifty or two hundred basis 86 00:04:06,520 --> 00:04:10,320 Speaker 3: points in a pont over over the course of a year, 87 00:04:10,680 --> 00:04:13,040 Speaker 3: and as that occurs, that's when you see the front 88 00:04:13,120 --> 00:04:15,839 Speaker 3: end really start to gain some traction. But keep in mind, 89 00:04:15,880 --> 00:04:18,679 Speaker 3: you know, we yesterday was interesting because the curves steepened 90 00:04:18,760 --> 00:04:22,159 Speaker 3: ten basis points. It only had steepened eighteen basis points 91 00:04:22,160 --> 00:04:25,240 Speaker 3: the whole year, right, So you're talking about a massive 92 00:04:25,279 --> 00:04:28,680 Speaker 3: move in terms of of you know, just this relative 93 00:04:28,760 --> 00:04:30,719 Speaker 3: to how much we'd moved this year in terms of 94 00:04:30,760 --> 00:04:32,640 Speaker 3: the two versus ten year curve. 95 00:04:33,360 --> 00:04:36,040 Speaker 4: All right, looking at that two year word four forty, 96 00:04:36,080 --> 00:04:38,600 Speaker 4: we weren't you know, five percent just recently. Is that 97 00:04:38,680 --> 00:04:41,719 Speaker 4: sixty basis point moved? Is that a reasonable kind of 98 00:04:41,720 --> 00:04:43,680 Speaker 4: move in that timeframe or is this a market? But 99 00:04:43,720 --> 00:04:44,839 Speaker 4: that's been moving pretty quickly. 100 00:04:46,360 --> 00:04:49,720 Speaker 3: It's not that unusual. If you go back in time 101 00:04:49,920 --> 00:04:53,839 Speaker 3: and you don't include the twenty twelve to twenty eighteen period, 102 00:04:53,960 --> 00:04:58,480 Speaker 3: it's usually the range of ten year treasury yields is 103 00:04:58,480 --> 00:05:01,520 Speaker 3: is somewhere around one hundred basis point a year. So yeah, 104 00:05:01,520 --> 00:05:04,599 Speaker 3: you know, seeing moves of forty to sixty basis points 105 00:05:04,600 --> 00:05:07,400 Speaker 3: over six month period is not that unusual. In fact, 106 00:05:07,400 --> 00:05:09,599 Speaker 3: we've had three of them just in the last two years. 107 00:05:10,200 --> 00:05:12,680 Speaker 3: You know, you go back to the last October. You know, 108 00:05:12,720 --> 00:05:16,120 Speaker 3: we went from in August we were you know, near 109 00:05:16,160 --> 00:05:18,800 Speaker 3: four percent. In October we were near five percent, and 110 00:05:18,839 --> 00:05:21,320 Speaker 3: then we've rallied all the way back down to under 111 00:05:21,360 --> 00:05:23,640 Speaker 3: four percent. Right, So so you're talking about one hundred 112 00:05:23,680 --> 00:05:25,240 Speaker 3: bases point range that we're in, an now we're headed 113 00:05:25,279 --> 00:05:28,599 Speaker 3: towards the lower end of that. I think ultimately we 114 00:05:28,680 --> 00:05:31,160 Speaker 3: will see by the end of the year a more 115 00:05:31,240 --> 00:05:35,120 Speaker 3: substantial and obvious slowdown in the economy. So that's where 116 00:05:35,360 --> 00:05:37,600 Speaker 3: you can see ten year yields actually fall below four 117 00:05:37,680 --> 00:05:40,080 Speaker 3: percent once again. But it's not what It's going to 118 00:05:40,120 --> 00:05:41,799 Speaker 3: be choppy, it's not going to be one way straight. 119 00:05:41,960 --> 00:05:43,200 Speaker 3: It's not one trade that's going to. 120 00:05:43,200 --> 00:05:47,440 Speaker 4: Bring us there, all right, Ira, The men's Olympic soccer 121 00:05:47,480 --> 00:05:50,000 Speaker 4: team lost three nil, See what I did there? Three 122 00:05:50,200 --> 00:05:52,760 Speaker 4: nil to France. What do you make of that game? 123 00:05:52,800 --> 00:05:55,440 Speaker 4: And what are your expectations for the US team? 124 00:05:56,040 --> 00:05:58,680 Speaker 3: Well, I have to so keep in mind on the 125 00:05:58,720 --> 00:06:01,680 Speaker 3: men's side, this is it. The the Olympic team is 126 00:06:01,720 --> 00:06:04,280 Speaker 3: the under twenty threes and we don't And a lot 127 00:06:04,279 --> 00:06:06,400 Speaker 3: of our best players are actually under twenty three and 128 00:06:06,480 --> 00:06:08,600 Speaker 3: not at the Olympics because they play in the first 129 00:06:08,600 --> 00:06:11,360 Speaker 3: team and they played in Copa America earlier this year. 130 00:06:12,200 --> 00:06:14,640 Speaker 3: So it just shows you that the depth of talent 131 00:06:14,760 --> 00:06:17,000 Speaker 3: in the US versus some of the other big countries 132 00:06:17,040 --> 00:06:20,360 Speaker 3: like France. You know, France has very deep talent pool 133 00:06:20,440 --> 00:06:22,080 Speaker 3: that and they have a lot of under twenty threes 134 00:06:22,080 --> 00:06:24,719 Speaker 3: who are who are outstanding players. And for US, we 135 00:06:24,800 --> 00:06:27,720 Speaker 3: have some players that are outstanding at under twenty three. 136 00:06:27,760 --> 00:06:30,920 Speaker 5: But the talent that that there's a talent. 137 00:06:30,680 --> 00:06:33,240 Speaker 3: Gap there from the top to the bottom in the 138 00:06:33,320 --> 00:06:35,039 Speaker 3: US clearly in that age group. 139 00:06:35,279 --> 00:06:38,760 Speaker 2: And how and again why do they play before the 140 00:06:38,800 --> 00:06:41,680 Speaker 2: Olympic opening games? They're just too many? 141 00:06:41,760 --> 00:06:41,919 Speaker 6: Is that? 142 00:06:42,080 --> 00:06:43,960 Speaker 2: Is that the thing? And like if you play earlier, 143 00:06:44,080 --> 00:06:45,920 Speaker 2: do you not get to go to the Olympic opening 144 00:06:45,960 --> 00:06:46,720 Speaker 2: ceremony or not? 145 00:06:47,560 --> 00:06:49,240 Speaker 7: World I mean the. 146 00:06:51,240 --> 00:06:53,480 Speaker 3: No, no, they used to be until the World Cup 147 00:06:53,520 --> 00:06:55,800 Speaker 3: came around in uh, you know, one hundred or so 148 00:06:55,880 --> 00:06:57,400 Speaker 3: years ago, just about one hundred years ago. 149 00:06:58,240 --> 00:06:59,719 Speaker 7: The one of the. 150 00:06:59,760 --> 00:07:03,440 Speaker 3: Reasons that the Olympics soccer starts early is because you 151 00:07:03,440 --> 00:07:06,080 Speaker 3: can only only have two games a week, so and 152 00:07:06,360 --> 00:07:08,680 Speaker 3: the Olympics itself is only two weeks. So unless you want, 153 00:07:08,720 --> 00:07:11,840 Speaker 3: unless you had eight teams only going to the Olympics 154 00:07:12,000 --> 00:07:14,640 Speaker 3: it'd be hard to finish the tournament before that, So 155 00:07:14,680 --> 00:07:17,320 Speaker 3: that's why you have you know, if you have sixteen 156 00:07:17,360 --> 00:07:18,240 Speaker 3: teams like they do. 157 00:07:18,400 --> 00:07:19,120 Speaker 7: I think it's sixteen. 158 00:07:19,120 --> 00:07:21,800 Speaker 3: If memory serves you know, you basically have to start 159 00:07:21,840 --> 00:07:24,520 Speaker 3: a week before or a couple of days before the 160 00:07:24,560 --> 00:07:26,000 Speaker 3: actual opening. 161 00:07:25,760 --> 00:07:28,960 Speaker 4: Ceremony, adding more more value every day. Irid Jersey with 162 00:07:29,000 --> 00:07:32,640 Speaker 4: a soccer talk. He's also has a side gig chief 163 00:07:32,760 --> 00:07:35,600 Speaker 4: US indust rate strategist for a Bloomberg Intelligence. 164 00:07:37,240 --> 00:07:41,119 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 165 00:07:41,200 --> 00:07:44,720 Speaker 1: weekdays at ten am Eastern on applecard Play and Android 166 00:07:44,760 --> 00:07:47,520 Speaker 1: Auto with the Bloomberg Business app. You can also listen 167 00:07:47,640 --> 00:07:50,720 Speaker 1: live on Amazon Alexa from our flagship New York station. 168 00:07:51,120 --> 00:07:53,880 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 169 00:07:55,240 --> 00:07:57,920 Speaker 2: Let's stay on earnings and things for a moment. Southwest 170 00:07:57,920 --> 00:08:01,640 Speaker 2: airlines up by over three percent and they are changing 171 00:08:01,680 --> 00:08:06,400 Speaker 2: their open seat is huge. This is huge. 172 00:08:06,520 --> 00:08:09,760 Speaker 4: I never really flew Southwest that much, and I don't 173 00:08:09,800 --> 00:08:12,640 Speaker 4: know the reason behind the open seating, but I know 174 00:08:12,680 --> 00:08:13,560 Speaker 4: that people like it. 175 00:08:13,880 --> 00:08:15,600 Speaker 2: Yeah yeah, and also then you can pay for like 176 00:08:15,640 --> 00:08:18,440 Speaker 2: where you stand online and stuff right right. 177 00:08:18,560 --> 00:08:20,920 Speaker 7: Lets like the fact that you can get on an airplane, 178 00:08:20,920 --> 00:08:21,800 Speaker 7: then you have to scramble. 179 00:08:22,400 --> 00:08:26,880 Speaker 2: I don't I don't know budgeting then yeah, maybe that 180 00:08:26,880 --> 00:08:29,000 Speaker 2: would be something. But they are keeping their bags for 181 00:08:29,040 --> 00:08:32,560 Speaker 2: fly for free policy. But George Ferguson is Boomberg Intelligence 182 00:08:32,559 --> 00:08:35,400 Speaker 2: and your aerospace defense and airlines analysts and joining us. Now, 183 00:08:36,000 --> 00:08:39,800 Speaker 2: what did you make of them scrapping this open seating policy. 184 00:08:40,720 --> 00:08:44,240 Speaker 8: Yeah, it's all about revenue generation, right, So I think 185 00:08:44,280 --> 00:08:47,400 Speaker 8: they're trying to put a little more distance on themselves 186 00:08:48,000 --> 00:08:51,200 Speaker 8: and the low cost and ultra low cost carriers, you know, 187 00:08:51,280 --> 00:08:53,760 Speaker 8: Frontier and Spirit. I agree with you. I don't know 188 00:08:53,800 --> 00:08:55,600 Speaker 8: that all of us enjoy sort of scrambling for a 189 00:08:55,640 --> 00:08:59,520 Speaker 8: seat when we jump on an airplane. So customers maybe 190 00:09:00,040 --> 00:09:03,880 Speaker 8: will take this better than scrapping bags fly free or 191 00:09:03,880 --> 00:09:07,600 Speaker 8: no change fees, you know. So to me, it seems 192 00:09:07,600 --> 00:09:11,200 Speaker 8: like could be a good evolution in the strategy. Makes 193 00:09:11,240 --> 00:09:16,960 Speaker 8: them look more like their full service competitor, you know, Brethren, 194 00:09:17,480 --> 00:09:21,760 Speaker 8: United American and Delta. And again they need to generate 195 00:09:21,760 --> 00:09:24,760 Speaker 8: some more revenue, so they're going to sell you aisle seats, 196 00:09:24,840 --> 00:09:30,079 Speaker 8: window seats, exit row seats, premium seats. Yeah, they're starting 197 00:09:30,120 --> 00:09:31,959 Speaker 8: to look like their big airlines are starting to look 198 00:09:31,960 --> 00:09:33,640 Speaker 8: more like the other big airlines. 199 00:09:33,960 --> 00:09:37,360 Speaker 4: And Alex I note from the YouTube video that George 200 00:09:37,440 --> 00:09:40,960 Speaker 4: is in our Queen Victoria Street offices which are just spectaculum, 201 00:09:40,960 --> 00:09:45,000 Speaker 4: because he was at the Farnborough air Show slash boondoggle 202 00:09:45,120 --> 00:09:48,079 Speaker 4: in London this week. So good for George. Hey George, 203 00:09:48,920 --> 00:09:50,400 Speaker 4: every plane I got on, I don't worry. I won't 204 00:09:50,400 --> 00:09:53,000 Speaker 4: tell them because they're not in the office your management team. 205 00:09:53,559 --> 00:09:57,680 Speaker 4: The reason I go onto a plane every seat is full. 206 00:09:58,240 --> 00:10:00,200 Speaker 4: So that implies to me that demand is there. That 207 00:10:00,240 --> 00:10:02,640 Speaker 4: implies to me that the airlines would have pricing power. 208 00:10:03,040 --> 00:10:06,480 Speaker 4: But I keep reading that they're not getting good yields 209 00:10:06,600 --> 00:10:08,400 Speaker 4: and that the fact that the fares are coming down. 210 00:10:08,480 --> 00:10:10,120 Speaker 4: Can you explain how this economics works? 211 00:10:11,080 --> 00:10:14,480 Speaker 8: Yeah, well, so I think this economics is the airlines 212 00:10:14,520 --> 00:10:18,840 Speaker 8: put too much capacity in the marketplace, and this business 213 00:10:18,880 --> 00:10:21,760 Speaker 8: is one where you don't let an airplane roll down 214 00:10:21,760 --> 00:10:26,400 Speaker 8: the runway without it being eighty five percent or more full. Nowadays, 215 00:10:26,600 --> 00:10:29,960 Speaker 8: the revenue generation officers, they just keep selling tickets as 216 00:10:30,000 --> 00:10:32,880 Speaker 8: long as it's covering the marginal costs. Right, And so 217 00:10:33,440 --> 00:10:36,320 Speaker 8: just because you saw all that volume didn't mean you 218 00:10:36,360 --> 00:10:40,040 Speaker 8: were seeing all that You know, revenue is as good 219 00:10:40,080 --> 00:10:42,040 Speaker 8: as it should have been. Now, look, they're all at 220 00:10:42,080 --> 00:10:44,880 Speaker 8: record levels of revenue, and that's because they got to 221 00:10:44,920 --> 00:10:48,480 Speaker 8: find a way to pay for higher pilot wages. They're 222 00:10:48,559 --> 00:10:52,719 Speaker 8: not anywhere near record levels of profit. So again, I think, 223 00:10:52,760 --> 00:10:54,160 Speaker 8: you know, they were kind of counting on an even 224 00:10:54,280 --> 00:10:59,680 Speaker 8: stronger revenue environment, you know, as they might say. We 225 00:10:59,760 --> 00:11:03,160 Speaker 8: saw yields at American down six percent, you know, which 226 00:11:03,200 --> 00:11:05,360 Speaker 8: is that's pretty so, I mean, yields look like they're 227 00:11:05,600 --> 00:11:07,960 Speaker 8: nosing over and that's a lot about the concern here. 228 00:11:08,000 --> 00:11:10,640 Speaker 8: Right We're seeing negative yields at all the airlines, and 229 00:11:10,679 --> 00:11:14,120 Speaker 8: that's the concern that there's just too much supply. Consumers 230 00:11:14,240 --> 00:11:18,440 Speaker 8: kind of is tighter and not willing to pay anything 231 00:11:18,440 --> 00:11:20,920 Speaker 8: to go to, you know, go on vacation, and that's 232 00:11:20,920 --> 00:11:21,600 Speaker 8: a challenge here. 233 00:11:21,679 --> 00:11:23,440 Speaker 2: You got to hop in like thirty seconds. But American 234 00:11:23,480 --> 00:11:25,560 Speaker 2: Airlines stock is now up over two percent. So what 235 00:11:25,640 --> 00:11:26,600 Speaker 2: led that to the upside? 236 00:11:26,600 --> 00:11:29,200 Speaker 8: Now, Yeah, so some of the guides I'm seeing is 237 00:11:29,360 --> 00:11:33,800 Speaker 8: increases of two to three percent of capacity in three Q. 238 00:11:34,320 --> 00:11:37,760 Speaker 8: This could be the beginning of getting the capacity growth 239 00:11:38,200 --> 00:11:39,480 Speaker 8: in the right area. I don't think it's going to 240 00:11:39,480 --> 00:11:41,360 Speaker 8: be a great quarter three Q but it could be 241 00:11:41,360 --> 00:11:42,439 Speaker 8: better than we all expect. 242 00:11:42,840 --> 00:11:45,480 Speaker 2: All right, thanks so much, George, appreciate you. George Fergus 243 00:11:45,480 --> 00:11:48,920 Speaker 2: and Boomerg Intelligence Senior Aerospace, Defense and Airlines analyst joining 244 00:11:48,960 --> 00:11:51,199 Speaker 2: us on Southwest as well as American. 245 00:11:52,720 --> 00:11:56,600 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 246 00:11:56,679 --> 00:11:59,720 Speaker 1: weekdays at ten am Eastern on Focarplay and then Broyd 247 00:11:59,720 --> 00:12:02,880 Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever 248 00:12:02,920 --> 00:12:06,760 Speaker 1: you get your podcasts, or watch us live on YouTube. 249 00:12:08,000 --> 00:12:11,000 Speaker 2: Let's get back to earnings here Astrosenica. That stock over 250 00:12:11,080 --> 00:12:13,400 Speaker 2: in London is now down by almost two percent. The 251 00:12:13,440 --> 00:12:16,959 Speaker 2: company did report earnings that were pretty solid. The company 252 00:12:16,960 --> 00:12:19,440 Speaker 2: came in with core earnings per share at one point 253 00:12:19,520 --> 00:12:22,720 Speaker 2: nine to eight cents one dollar ninety eight cents. Let's 254 00:12:22,720 --> 00:12:25,280 Speaker 2: say it that way. Operating profit coming in about four 255 00:12:25,720 --> 00:12:28,480 Speaker 2: point ten billion dollars. So we want to check in 256 00:12:28,520 --> 00:12:32,520 Speaker 2: with the chief financial officer, Aradna Saran over at Astrosenica 257 00:12:32,679 --> 00:12:35,120 Speaker 2: on this. It's great to get your perspective. We always 258 00:12:35,120 --> 00:12:37,280 Speaker 2: appreciate the busy day that you have on earnings. Thank 259 00:12:37,280 --> 00:12:40,199 Speaker 2: you very much for joining us. Give us some clarity 260 00:12:40,280 --> 00:12:43,000 Speaker 2: on that top line growth and the upgrade that you had, 261 00:12:43,040 --> 00:12:45,920 Speaker 2: you're raising that revenue, what is driving it in terms 262 00:12:45,960 --> 00:12:49,120 Speaker 2: of product sales and how much of that's collaboration income, 263 00:12:51,200 --> 00:12:52,320 Speaker 2: So actually all. 264 00:12:52,200 --> 00:12:56,560 Speaker 9: The upgrade is being driven by product revenue. This year 265 00:12:56,640 --> 00:13:00,319 Speaker 9: we had this quarter was actually a record quarter twelve 266 00:13:00,360 --> 00:13:04,000 Speaker 9: point nine billion in revenue, and it was driven across 267 00:13:04,000 --> 00:13:08,640 Speaker 9: the board with record revenues in all our therapeutic areas. 268 00:13:08,640 --> 00:13:11,400 Speaker 9: So oncology, which is about forty one percent of our 269 00:13:11,440 --> 00:13:16,280 Speaker 9: business five point three billion in revenue, growing nineteen percent, 270 00:13:17,040 --> 00:13:22,400 Speaker 9: cardiovascular medicines growing twenty two percent, Respiratory and immunology growing 271 00:13:22,440 --> 00:13:25,320 Speaker 9: twenty six percent, and our rare disease business, which is 272 00:13:25,320 --> 00:13:28,800 Speaker 9: about a two point one billion dollar business, growing fourteen percent. 273 00:13:29,520 --> 00:13:33,400 Speaker 9: And same geographically, you know, we're seeing very strong growth 274 00:13:33,520 --> 00:13:38,000 Speaker 9: in the US, double digital growth, also in emerging markets 275 00:13:38,040 --> 00:13:42,200 Speaker 9: and in China both growing around eighteen percent, Europe twenty 276 00:13:42,240 --> 00:13:46,599 Speaker 9: four percent. So it's really demand for all our innovative 277 00:13:46,640 --> 00:13:51,720 Speaker 9: medicines across different geographies and across different therapeutic areas. So 278 00:13:51,800 --> 00:13:55,800 Speaker 9: we raised our guidance for the year both on revenue 279 00:13:55,840 --> 00:14:02,080 Speaker 9: and EPs to now mid teens and it's almost in 280 00:14:02,120 --> 00:14:05,360 Speaker 9: some ways you could consider a double raise, because we 281 00:14:05,559 --> 00:14:09,559 Speaker 9: also said that we would meet these guidance without any 282 00:14:09,559 --> 00:14:13,640 Speaker 9: increase in collaboration revenue that we were anticipating earlier in 283 00:14:13,640 --> 00:14:17,679 Speaker 9: the year. So it's really driven by fundamental underlying growth. 284 00:14:18,200 --> 00:14:20,440 Speaker 4: So doctor, I know, I'm just looking at the Bloomberg 285 00:14:20,520 --> 00:14:22,160 Speaker 4: terminal here. So you have a run rate revenue of 286 00:14:22,160 --> 00:14:25,880 Speaker 4: about fifty billion right now, and you guys have said 287 00:14:25,880 --> 00:14:29,400 Speaker 4: that you're targeting eighty billion in sales in twenty thirty. 288 00:14:29,840 --> 00:14:31,600 Speaker 4: What's going to bridge the gap, what's going to get 289 00:14:31,640 --> 00:14:32,800 Speaker 4: you there? What should we be keeping an. 290 00:14:32,760 --> 00:14:37,800 Speaker 9: Eye on, So you know, there's a lot going on 291 00:14:38,080 --> 00:14:42,880 Speaker 9: in the pipeline. What's the ambition that we set for 292 00:14:43,280 --> 00:14:47,520 Speaker 9: twenty thirty of eighty billion is driven by I would 293 00:14:47,520 --> 00:14:52,040 Speaker 9: say three different elements. The first element is the products 294 00:14:52,040 --> 00:14:54,760 Speaker 9: that we have today and the indications we have today 295 00:14:54,840 --> 00:14:57,160 Speaker 9: and growth in those and that's sort of sort of 296 00:14:57,160 --> 00:15:00,600 Speaker 9: what you see in the quarterly performance today. The second 297 00:15:00,600 --> 00:15:04,480 Speaker 9: element is the current products that are on the market, 298 00:15:04,560 --> 00:15:08,480 Speaker 9: but what we call life cycle extension, so entering into 299 00:15:08,600 --> 00:15:13,400 Speaker 9: for example, additional indications or expanding indications and other tumer 300 00:15:13,480 --> 00:15:17,040 Speaker 9: types c that's a second element. And then the third 301 00:15:17,040 --> 00:15:21,160 Speaker 9: element is new molecular entities. So these are brand new 302 00:15:21,200 --> 00:15:26,080 Speaker 9: molecules which you know we've discovered we're working on that 303 00:15:26,160 --> 00:15:29,440 Speaker 9: are in phase two or phase three clinical studies and 304 00:15:30,160 --> 00:15:33,320 Speaker 9: hope that will be successful in them and will launch 305 00:15:33,360 --> 00:15:37,280 Speaker 9: them by twenty thirty. We have set an ambition of 306 00:15:37,840 --> 00:15:42,400 Speaker 9: achieving this revenue but also launching twenty new molecular entities 307 00:15:42,440 --> 00:15:48,359 Speaker 9: by twenty thirty, having twenty five blockbusters, so that's products 308 00:15:48,400 --> 00:15:52,560 Speaker 9: over a billion dollars in revenues in the year by 309 00:15:52,640 --> 00:15:56,320 Speaker 9: twenty thirty. And you know what's going to bridge the gap. 310 00:15:56,360 --> 00:15:59,560 Speaker 9: If you look at the studies we have ongoing, we 311 00:15:59,600 --> 00:16:03,440 Speaker 9: will have probably about forty studies in the next eighteen months, 312 00:16:03,440 --> 00:16:06,520 Speaker 9: so I end up twenty twenty five that we hope 313 00:16:06,560 --> 00:16:10,600 Speaker 9: to read out and that will give us more confidence 314 00:16:11,200 --> 00:16:14,360 Speaker 9: with the trajectory that we're on on achieving that twenty 315 00:16:14,480 --> 00:16:17,800 Speaker 9: thirty ambition. So you know, this is a it's a 316 00:16:17,880 --> 00:16:21,400 Speaker 9: risk business. Obviously, we take risk every day. We invest 317 00:16:21,760 --> 00:16:24,480 Speaker 9: twenty two percent of our R and D of our 318 00:16:24,520 --> 00:16:26,640 Speaker 9: revenue in R and D, so it's a very R 319 00:16:26,640 --> 00:16:31,200 Speaker 9: and D heavy business. And you know, we hope that 320 00:16:31,960 --> 00:16:34,760 Speaker 9: you know, our studies are successful to achieve those goals. 321 00:16:35,320 --> 00:16:38,880 Speaker 2: Our governments your friend or foe right now in terms 322 00:16:38,960 --> 00:16:43,560 Speaker 2: of the UK being an unfavorable or favorable environment. There's 323 00:16:43,640 --> 00:16:46,960 Speaker 2: also the threats of IRA potentially being rolled back under 324 00:16:47,000 --> 00:16:49,600 Speaker 2: President Trump. How do you guys sort of think about 325 00:16:49,880 --> 00:16:52,000 Speaker 2: government interaction with your company? 326 00:16:54,400 --> 00:16:57,280 Speaker 9: You know, governments are a very important stakeholder for us, 327 00:16:58,320 --> 00:17:01,840 Speaker 9: you know, in the US as well as outside the US. 328 00:17:02,760 --> 00:17:06,600 Speaker 9: You know, many many systems, healthcare systems are single payer systems, 329 00:17:06,640 --> 00:17:10,000 Speaker 9: so we do work very closely with governments. You know, 330 00:17:10,040 --> 00:17:12,640 Speaker 9: the most important thing for US is to make sure 331 00:17:12,720 --> 00:17:16,159 Speaker 9: that we have you know, once we've spent the money 332 00:17:16,200 --> 00:17:20,400 Speaker 9: and developed innovative medicines, whether it's for cardiovastlar disease or oncology, 333 00:17:20,920 --> 00:17:25,320 Speaker 9: that patients actually get access to those medicines, you know, 334 00:17:25,359 --> 00:17:28,560 Speaker 9: and we can make an impact in their lives and 335 00:17:29,119 --> 00:17:33,320 Speaker 9: you know, from from diseases they're suffering from. And in 336 00:17:33,359 --> 00:17:35,920 Speaker 9: that way, we need to be able to demonstrate that 337 00:17:36,119 --> 00:17:39,720 Speaker 9: these drugs have value and are bringing value to the 338 00:17:39,760 --> 00:17:42,560 Speaker 9: patients and to the healthcare system. And we work very 339 00:17:42,560 --> 00:17:47,040 Speaker 9: closely with with governments and with systems to make sure 340 00:17:47,080 --> 00:17:49,160 Speaker 9: we get access to those medicines. 341 00:17:49,880 --> 00:17:51,840 Speaker 4: Doctor Saron, you know, I always joke on the show 342 00:17:51,840 --> 00:17:53,200 Speaker 4: that when I come back in the next life, I 343 00:17:53,240 --> 00:17:55,280 Speaker 4: want to be a healthcare M and a banker, because 344 00:17:55,280 --> 00:17:57,320 Speaker 4: it seems every Monday we come in and there's another 345 00:17:57,960 --> 00:18:00,000 Speaker 4: deal out there. How does how do you and your 346 00:18:00,160 --> 00:18:02,960 Speaker 4: company think about M and A to kind of drive 347 00:18:03,040 --> 00:18:05,640 Speaker 4: top line growth versus the R and D that you've 348 00:18:05,640 --> 00:18:06,560 Speaker 4: already talked about. 349 00:18:08,600 --> 00:18:12,560 Speaker 9: So the ambition that we set for twenty thirty, the 350 00:18:12,640 --> 00:18:15,439 Speaker 9: eighty billion does not include any major M and A. 351 00:18:16,480 --> 00:18:19,760 Speaker 9: You know, we are always looking from a scientific standpoint, 352 00:18:20,280 --> 00:18:24,320 Speaker 9: not only within our own labs and identifying what could 353 00:18:24,320 --> 00:18:28,199 Speaker 9: be the next most promising molecule, but also looking outside 354 00:18:28,359 --> 00:18:33,120 Speaker 9: and science that is happening in universities and biotech companies 355 00:18:33,400 --> 00:18:36,840 Speaker 9: and so forth. Over the last year and a half, 356 00:18:36,880 --> 00:18:42,600 Speaker 9: we've invested close to seven billion in doing licensing transactions 357 00:18:42,600 --> 00:18:48,439 Speaker 9: and partnerships and smaller M and A transactions that you know, 358 00:18:48,600 --> 00:18:52,119 Speaker 9: keep help to build our pipeline and really you know, 359 00:18:52,160 --> 00:18:55,760 Speaker 9: fit very well strategically with us in terms of the 360 00:18:55,800 --> 00:18:59,560 Speaker 9: ambition that we have, and particularly in new therapy areas 361 00:18:59,640 --> 00:19:02,640 Speaker 9: where you know we've made some investment, but it can 362 00:19:02,720 --> 00:19:07,159 Speaker 9: help us leap frog into the field. For example, in 363 00:19:07,240 --> 00:19:10,080 Speaker 9: the case of cell therapies or in the case of 364 00:19:10,280 --> 00:19:15,639 Speaker 9: radio pharmaceuticals, and accelerate the investments that we're already making. 365 00:19:15,720 --> 00:19:19,080 Speaker 9: So you know, we're always looking for those types of partnerships. 366 00:19:19,280 --> 00:19:21,679 Speaker 2: So this is a really uncfo question to ask you, 367 00:19:22,200 --> 00:19:24,840 Speaker 2: what's the coolest drug that you guys are working on 368 00:19:24,920 --> 00:19:27,560 Speaker 2: right now, the one thing that you're most excited about 369 00:19:28,359 --> 00:19:30,080 Speaker 2: and a potential breakthrough there. 370 00:19:32,640 --> 00:19:34,760 Speaker 9: That's a I don't know if it's an un pool 371 00:19:34,840 --> 00:19:36,960 Speaker 9: or maybe it's unfair. You know, it's hard to pick 372 00:19:37,000 --> 00:19:39,679 Speaker 9: from pick from your children, right, so there are just 373 00:19:39,720 --> 00:19:43,280 Speaker 9: so many exciting things happening and every you know, every 374 00:19:43,320 --> 00:19:45,920 Speaker 9: few weeks, we we get some new data that makes 375 00:19:46,000 --> 00:19:49,720 Speaker 9: us excited. So it's really hard to pick a favorite child. 376 00:19:51,040 --> 00:19:53,199 Speaker 9: But you know, there's a there's a lot going on, 377 00:19:53,320 --> 00:19:56,600 Speaker 9: and you know, we live in very exciting times where 378 00:19:57,200 --> 00:19:59,960 Speaker 9: not only is you know, what we do in astrosenic 379 00:20:00,800 --> 00:20:05,679 Speaker 9: is important, but science is evolving so quickly and technology 380 00:20:05,720 --> 00:20:08,720 Speaker 9: is evolving quickly, and you know we're we're sort of 381 00:20:08,800 --> 00:20:10,360 Speaker 9: at the forefront of that innovation. 382 00:20:11,359 --> 00:20:13,560 Speaker 2: All right, Thank you so much. We truly appreciate it. 383 00:20:14,040 --> 00:20:17,040 Speaker 2: A Radne Sarah and chief financial officer over at AstraZeneca, 384 00:20:17,600 --> 00:20:20,280 Speaker 2: joining us on earnings. Really appreciate that. Now I'm an 385 00:20:20,280 --> 00:20:22,160 Speaker 2: only child and I only have one daughter. 386 00:20:22,240 --> 00:20:23,600 Speaker 4: Okay, but I'm always. 387 00:20:23,359 --> 00:20:26,240 Speaker 2: Assuming that as a parent you have a favorite. Where 388 00:20:26,280 --> 00:20:27,200 Speaker 2: does that not work like that? 389 00:20:27,359 --> 00:20:29,560 Speaker 4: Well, you have multiple kids. My kid, my four kids 390 00:20:29,640 --> 00:20:32,040 Speaker 4: are youngest has always told us that he is the favorite. 391 00:20:32,080 --> 00:20:33,720 Speaker 4: And this is when he's a little little boy, because 392 00:20:33,720 --> 00:20:35,800 Speaker 4: he gives the best presence in the best hugs. So 393 00:20:35,840 --> 00:20:37,680 Speaker 4: I'll stick with He's now twenty years old, but I'm 394 00:20:37,680 --> 00:20:38,400 Speaker 4: gonna stick with that. 395 00:20:38,800 --> 00:20:39,400 Speaker 2: It's amazing. 396 00:20:39,400 --> 00:20:42,800 Speaker 7: I still get a grief from the two saying, well, 397 00:20:42,920 --> 00:20:44,560 Speaker 7: you have more pictures of him than me. 398 00:20:45,240 --> 00:20:48,480 Speaker 2: Okay, so you may not actually pick a favorite, but 399 00:20:48,520 --> 00:20:49,199 Speaker 2: they think you do. 400 00:20:49,800 --> 00:20:51,840 Speaker 7: Yeah, I like the way you put that. 401 00:20:51,920 --> 00:20:55,280 Speaker 4: So drugs are incentient being that once I graduate college, 402 00:20:55,280 --> 00:20:57,280 Speaker 4: they're done, you know, so they're on their own. So 403 00:20:57,320 --> 00:20:59,359 Speaker 4: that's equal opportunity. 404 00:20:59,040 --> 00:21:02,760 Speaker 2: Equal opportunity to tough love from Paulsmeeny. 405 00:21:03,040 --> 00:21:06,920 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 406 00:21:07,000 --> 00:21:10,520 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 407 00:21:10,560 --> 00:21:13,320 Speaker 1: Auto with the Bloomberg Business app. You can also listen 408 00:21:13,440 --> 00:21:16,520 Speaker 1: live on Amazon Alexa from our flagship New York station 409 00:21:16,880 --> 00:21:20,399 Speaker 1: Just say, Alexa playing Bloomberg eleven thirty. 410 00:21:21,600 --> 00:21:23,159 Speaker 4: All right, Alex Deelauls when you were live here in 411 00:21:23,160 --> 00:21:25,680 Speaker 4: our Bloomberg Interactive Brokers studio. We're streaming live on YouTube 412 00:21:25,680 --> 00:21:27,280 Speaker 4: as well, so head over there and check us out 413 00:21:27,280 --> 00:21:29,639 Speaker 4: on the video side. One of the topics that Alex 414 00:21:29,680 --> 00:21:31,400 Speaker 4: and I love to focus on, we think it's really 415 00:21:31,440 --> 00:21:35,160 Speaker 4: important is commercial real estate. The opportunities, the risks out 416 00:21:35,200 --> 00:21:36,800 Speaker 4: there and the risk are are big time. We talk 417 00:21:36,840 --> 00:21:38,880 Speaker 4: about that a lot. Today we're going to focus on 418 00:21:39,119 --> 00:21:41,919 Speaker 4: I think that the hotel business, the hospitality business, the 419 00:21:41,960 --> 00:21:45,160 Speaker 4: resort business. Great guest in our studio today, Sean harr 420 00:21:45,200 --> 00:21:48,479 Speaker 4: He's a principal and managing partner Trinity Investments. The office 421 00:21:48,480 --> 00:21:51,920 Speaker 4: is in Honolulu, Los Angeles, London. I don't see Cleveland here. 422 00:21:52,320 --> 00:21:55,159 Speaker 4: He's based in Miami, A good place to be with 423 00:21:55,240 --> 00:21:57,679 Speaker 4: everybody else in financial services. Sean, thanks so much for 424 00:21:57,720 --> 00:22:01,240 Speaker 4: coming into our studio here. Let's start with the pandemic 425 00:22:01,280 --> 00:22:05,520 Speaker 4: because your industry literally shut its doors locked and through 426 00:22:05,520 --> 00:22:07,760 Speaker 4: away the key here. Tell us about what happened in 427 00:22:07,800 --> 00:22:10,440 Speaker 4: your business and maybe opportunities coming out. 428 00:22:10,680 --> 00:22:12,520 Speaker 5: Sure, thank you and thank you so much for having 429 00:22:12,560 --> 00:22:15,119 Speaker 5: me today. So i'd say, the start of the pandemic 430 00:22:15,400 --> 00:22:19,919 Speaker 5: was which was truly devastating. We typically own brand managed 431 00:22:19,960 --> 00:22:22,960 Speaker 5: hotels that are four hundred rooms and larger, and typically 432 00:22:23,040 --> 00:22:27,119 Speaker 5: in the smile states of Florida, Texas, Arizona, California, Hawaii, 433 00:22:27,359 --> 00:22:30,879 Speaker 5: Carbo and we had to close all of these properties. 434 00:22:30,960 --> 00:22:34,080 Speaker 5: And I've likened it to stopping a super tanker mid 435 00:22:34,160 --> 00:22:37,359 Speaker 5: stream trying to close these hotels. But we used that 436 00:22:37,480 --> 00:22:41,560 Speaker 5: time to really complete renovation work to accelerate repositioning of 437 00:22:41,600 --> 00:22:44,880 Speaker 5: the assets. We also use that time to raise our 438 00:22:44,920 --> 00:22:48,439 Speaker 5: first commingled fund, which was a GP fund and became 439 00:22:48,480 --> 00:22:51,639 Speaker 5: one of the largest most active buyers of hotels in 440 00:22:51,680 --> 00:22:54,120 Speaker 5: the US during that time. I will say that all 441 00:22:54,160 --> 00:22:56,439 Speaker 5: of these properties that were closed during the pandemic have 442 00:22:56,560 --> 00:23:00,720 Speaker 5: come roaring back. They're are renovated, they're seeing in credible demand, 443 00:23:00,840 --> 00:23:04,160 Speaker 5: having record months of a month performance. So we've come 444 00:23:04,200 --> 00:23:06,040 Speaker 5: out of it well. But it was scary at the 445 00:23:06,040 --> 00:23:07,040 Speaker 5: start of the pandemic. 446 00:23:07,320 --> 00:23:10,560 Speaker 2: Do you foresee that kind of demand continuing. We've just 447 00:23:10,600 --> 00:23:14,720 Speaker 2: been trying to figure out what that leisure travel budget 448 00:23:14,800 --> 00:23:17,040 Speaker 2: winds up looking like for those that have budgets and 449 00:23:17,080 --> 00:23:18,080 Speaker 2: for those that don't. 450 00:23:18,840 --> 00:23:21,720 Speaker 5: I just read a statistic today alex That said that 451 00:23:21,840 --> 00:23:25,479 Speaker 5: in June, luxury demand was up for hotels nine percent, 452 00:23:26,119 --> 00:23:28,560 Speaker 5: and I think there's a two percent decrease in demand 453 00:23:28,600 --> 00:23:32,360 Speaker 5: for the economy segment. What we're seeing with the work 454 00:23:32,400 --> 00:23:34,760 Speaker 5: from home phenomenon in the US is that every weekend 455 00:23:34,880 --> 00:23:36,840 Speaker 5: is now a three or four day weekends, so people 456 00:23:36,920 --> 00:23:41,120 Speaker 5: are traveling more. At the same time, with the companies 457 00:23:41,160 --> 00:23:43,680 Speaker 5: having to shrink their office space, they can't hold off 458 00:23:43,680 --> 00:23:46,040 Speaker 5: sites and their offices anymore, so they're holding more off 459 00:23:46,040 --> 00:23:48,359 Speaker 5: site meetings to bring their teams together in the types 460 00:23:48,400 --> 00:23:51,480 Speaker 5: of hotels that we own, so we're seeing compression between 461 00:23:51,520 --> 00:23:55,560 Speaker 5: the leisure traveler and these off site group, corporate type travelers. 462 00:23:55,600 --> 00:23:58,760 Speaker 5: So it's baded well for our properties. 463 00:24:00,040 --> 00:24:02,560 Speaker 4: If you wanted to go out and buy a property, 464 00:24:02,720 --> 00:24:06,080 Speaker 4: or if you wanted to refinance a property today, or 465 00:24:06,119 --> 00:24:07,879 Speaker 4: the bankers pick up your phone calls, I mean, are 466 00:24:07,880 --> 00:24:08,920 Speaker 4: the banks lending here. 467 00:24:09,560 --> 00:24:12,680 Speaker 5: We've been fortunate, I'd say our business more and more 468 00:24:12,720 --> 00:24:15,840 Speaker 5: relies on relationships, and fortunately for us, we have tremendous 469 00:24:15,840 --> 00:24:19,159 Speaker 5: relationships in the lending market and in the you know, 470 00:24:19,200 --> 00:24:21,440 Speaker 5: the private equity A lot of our partners are large 471 00:24:21,480 --> 00:24:25,320 Speaker 5: private equity funds, We've completed well over two billion dollars 472 00:24:25,440 --> 00:24:30,000 Speaker 5: of financings and refinancings over the last eleven twelve months. 473 00:24:29,760 --> 00:24:30,760 Speaker 7: So we see it robust. 474 00:24:30,840 --> 00:24:34,000 Speaker 5: There has been more of a shift towards CNBS or 475 00:24:34,080 --> 00:24:37,560 Speaker 5: SASBY loans, but we've had loans as large as one 476 00:24:37,600 --> 00:24:39,280 Speaker 5: hundred and fifty million all the way up to seven 477 00:24:39,359 --> 00:24:42,040 Speaker 5: hundred and fifty million that we've been able to execute 478 00:24:42,040 --> 00:24:43,240 Speaker 5: in the last twelve months. 479 00:24:43,320 --> 00:24:45,399 Speaker 2: And are you getting that from banks or is it 480 00:24:45,440 --> 00:24:47,719 Speaker 2: private credit? Like where do you go for that? 481 00:24:48,000 --> 00:24:50,600 Speaker 5: So it's a mixture of sasby and then non bank 482 00:24:50,600 --> 00:24:51,720 Speaker 5: banks is SASBY. 483 00:24:51,800 --> 00:24:53,520 Speaker 7: I'm sure it's. 484 00:24:53,359 --> 00:24:57,960 Speaker 5: The CNBS market, so single asset, single bar CNBS market, 485 00:24:58,560 --> 00:25:01,440 Speaker 5: and so yeah, with that market is very active right now. 486 00:25:01,480 --> 00:25:05,159 Speaker 5: We just refinanced our Diplomat resort in Hollywood, Florida. There 487 00:25:05,240 --> 00:25:08,320 Speaker 5: was a five hundred and seventy five million dollar transaction 488 00:25:08,960 --> 00:25:12,240 Speaker 5: about two months ago. We bought a resort for that 489 00:25:12,359 --> 00:25:14,640 Speaker 5: a Core, which is a non bank bank. They financed 490 00:25:14,720 --> 00:25:17,680 Speaker 5: us in Scottsdale, Arizona. But it's all down to relationships. 491 00:25:18,400 --> 00:25:20,520 Speaker 4: You recently expanded into Europe. Tell us about that. 492 00:25:21,240 --> 00:25:23,639 Speaker 5: We're very excited about Europe. So Ryan Don, one of 493 00:25:23,680 --> 00:25:26,200 Speaker 5: our partners, moved to London about a year ago, really 494 00:25:26,240 --> 00:25:28,920 Speaker 5: at the request of some of our joint venture partners 495 00:25:29,280 --> 00:25:32,760 Speaker 5: who wanted an operating partner like Trinity in Europe. We 496 00:25:32,880 --> 00:25:36,120 Speaker 5: completed our first acquisition about two months ago. We bought 497 00:25:36,119 --> 00:25:40,000 Speaker 5: the Parkhayatt hotel in Zurich in partnership with oak Tree 498 00:25:40,040 --> 00:25:42,919 Speaker 5: and Ubs and Ryan now is the core team of 499 00:25:42,960 --> 00:25:48,320 Speaker 5: a head of development, acquisitions, asset management, etc. So we're 500 00:25:48,440 --> 00:25:50,680 Speaker 5: we're very excited about the prospects in Europe. 501 00:25:50,840 --> 00:25:53,120 Speaker 2: Who are your competitors? Is that a really silly question? 502 00:25:54,160 --> 00:25:57,639 Speaker 5: We definitely we compete with all of the private equity funds, 503 00:25:57,680 --> 00:26:00,200 Speaker 5: but they tend to be our joint venture partners as well. 504 00:26:00,520 --> 00:26:02,280 Speaker 5: So we've done a lot of business with oak Tree, 505 00:26:02,320 --> 00:26:06,040 Speaker 5: We've done a lot of business with Partners Group, with UBS, 506 00:26:06,680 --> 00:26:10,280 Speaker 5: with Elliott Management, and so we partner with these groups. 507 00:26:10,280 --> 00:26:12,639 Speaker 5: They rely on us for our in house expertise. We 508 00:26:12,680 --> 00:26:16,840 Speaker 5: have forty five professionals who live, breathe, and sleep hospitality. 509 00:26:16,960 --> 00:26:20,080 Speaker 5: That's what they do. We're hospitality real estate experts and 510 00:26:20,200 --> 00:26:22,800 Speaker 5: fortunately our competitors also collaborate with us. 511 00:26:23,280 --> 00:26:27,080 Speaker 4: What's a typical property that you guys that screens well, 512 00:26:27,119 --> 00:26:28,879 Speaker 4: for you guys, in terms of an acquisition, what do 513 00:26:28,920 --> 00:26:31,440 Speaker 4: you guys really look for, whether it's size or location 514 00:26:31,640 --> 00:26:33,240 Speaker 4: or capital structure, how do you screen that? 515 00:26:33,560 --> 00:26:36,399 Speaker 5: In the US, we typically focus on brand managed so 516 00:26:36,520 --> 00:26:40,119 Speaker 5: mainly Hilton married or Hyatt, and we typically focused on 517 00:26:40,200 --> 00:26:42,520 Speaker 5: properties that are four hundred rooms and larger, that are 518 00:26:42,560 --> 00:26:49,360 Speaker 5: more destination type properties. And these tend to be in Florida, Texas, Arizona, California, 519 00:26:49,440 --> 00:26:50,040 Speaker 5: and Hawaii. 520 00:26:50,160 --> 00:26:52,600 Speaker 4: So you would own the property, but Hilton would manage 521 00:26:52,600 --> 00:26:53,520 Speaker 4: it correct, Okay. 522 00:26:53,600 --> 00:26:56,760 Speaker 5: And we were so fortunate with the relationships we have 523 00:26:56,920 --> 00:26:59,880 Speaker 5: with the brands who really trust us with the assets, 524 00:26:59,880 --> 00:27:02,480 Speaker 5: and we also buy from the brand. So we've we've 525 00:27:02,520 --> 00:27:05,600 Speaker 5: bought three assets from Hyatt as they've you know, gone 526 00:27:05,680 --> 00:27:09,280 Speaker 5: on an asset light strategy. So Zurich was one, Greenwich, 527 00:27:09,320 --> 00:27:12,040 Speaker 5: Connecticut was another one, and then Indian Wells and California 528 00:27:12,119 --> 00:27:12,879 Speaker 5: was a third one. 529 00:27:12,920 --> 00:27:16,119 Speaker 4: But yeah, I'm not here in Cleveland here, I'm not 530 00:27:16,160 --> 00:27:17,080 Speaker 4: hearing des Moines. 531 00:27:17,480 --> 00:27:20,560 Speaker 2: Do you want to go to DesMoines? And of course, 532 00:27:21,240 --> 00:27:22,960 Speaker 2: I mean, like sure, but I mean from what you're 533 00:27:23,000 --> 00:27:26,639 Speaker 2: saying these are I'm not dissing the places. I'm dissing 534 00:27:27,359 --> 00:27:30,560 Speaker 2: the location for hotels in that if I'm going to 535 00:27:30,600 --> 00:27:32,840 Speaker 2: go to a destination and I'm going to extend it 536 00:27:32,960 --> 00:27:35,000 Speaker 2: and I'm gonna send a work trip or something, I'm 537 00:27:35,000 --> 00:27:36,600 Speaker 2: not gonna go to Des Moines. I'm going to go 538 00:27:36,680 --> 00:27:38,960 Speaker 2: to a place where i can soak up sun and 539 00:27:39,600 --> 00:27:41,160 Speaker 2: be in a pool and that kind of stuff. 540 00:27:41,200 --> 00:27:43,800 Speaker 5: Well, what we've learned is that you need multiple levers 541 00:27:43,880 --> 00:27:47,200 Speaker 5: because things do happen like COVID that are unforeseen. So 542 00:27:47,320 --> 00:27:50,320 Speaker 5: when you have one of these destination type properties, you 543 00:27:50,440 --> 00:27:55,080 Speaker 5: have multiple levers between group, corporate, leisure, meeting space, et 544 00:27:55,160 --> 00:27:57,480 Speaker 5: cetera that you can that you can play with to 545 00:27:57,680 --> 00:27:59,200 Speaker 5: induce demand to the assets. 546 00:27:59,640 --> 00:28:04,680 Speaker 4: So are you guys net buyers today? Are you net sellers. 547 00:28:06,320 --> 00:28:07,040 Speaker 7: All of the above? 548 00:28:08,119 --> 00:28:11,280 Speaker 5: We're definitely net buyers. You know, I think we're going 549 00:28:11,359 --> 00:28:14,480 Speaker 5: to see the debt market stabilized. While we've been successful 550 00:28:14,520 --> 00:28:17,159 Speaker 5: in them, you do need a more robust debt market 551 00:28:17,280 --> 00:28:20,880 Speaker 5: to induce buyers. I think the minute we see hopefully 552 00:28:21,119 --> 00:28:24,000 Speaker 5: an interest rate cut, you'll see a lot of demand 553 00:28:24,080 --> 00:28:26,280 Speaker 5: coming back into the market. So we do have assets 554 00:28:26,320 --> 00:28:29,000 Speaker 5: that are approaching stabilization and in the right conditions we 555 00:28:29,080 --> 00:28:29,520 Speaker 5: will sell. 556 00:28:29,680 --> 00:28:31,520 Speaker 4: Well, you know, Alex and I often when we talk 557 00:28:31,520 --> 00:28:33,359 Speaker 4: about commercial rule stay, we just think about here the 558 00:28:33,440 --> 00:28:37,240 Speaker 4: third Avenue of Manhattan, and we're hearing from experts that 559 00:28:37,480 --> 00:28:40,880 Speaker 4: when these things trade on the third Avenue Manhattan, their 560 00:28:40,960 --> 00:28:44,240 Speaker 4: b office kind of properties thirty forty cents on the dollar. Yeah, 561 00:28:44,680 --> 00:28:46,200 Speaker 4: if you go out and make an acquisition tidy of 562 00:28:46,240 --> 00:28:48,640 Speaker 4: a hotel, are you think you're getting You're not getting 563 00:28:48,960 --> 00:28:50,800 Speaker 4: a discount, are you? I mean, there are these things 564 00:28:50,840 --> 00:28:53,400 Speaker 4: trading about where they were trading or are they trading 565 00:28:53,400 --> 00:28:54,840 Speaker 4: at a discount of pre pandemic. 566 00:28:55,480 --> 00:28:58,080 Speaker 5: I would normally walk into a convention or a conference 567 00:28:58,160 --> 00:29:01,120 Speaker 5: as the hotel guy, and you know, you'd be sort 568 00:29:01,120 --> 00:29:04,560 Speaker 5: of the afterthought in terms of an asset class for 569 00:29:04,680 --> 00:29:07,480 Speaker 5: real estate, what we've proven in coming out of COVID 570 00:29:07,600 --> 00:29:09,840 Speaker 5: is that a we've been able to stay ahead of 571 00:29:09,880 --> 00:29:13,200 Speaker 5: inflation because you essentially reprice on a nightly basis, so 572 00:29:13,360 --> 00:29:15,560 Speaker 5: you can reprice your rooms, your food, and beverage. The 573 00:29:15,680 --> 00:29:18,320 Speaker 5: other side is that we typically trade at wider cap rates. 574 00:29:18,960 --> 00:29:21,400 Speaker 5: So if we're buying at a seven cap and we're 575 00:29:21,480 --> 00:29:24,120 Speaker 5: financing at an eight percent all in interest rate, there's 576 00:29:24,200 --> 00:29:27,080 Speaker 5: slight negative leverage and it's a value add investment that 577 00:29:27,160 --> 00:29:29,520 Speaker 5: we normally do. So we work our way into positive 578 00:29:29,600 --> 00:29:33,479 Speaker 5: territory pretty quickly. If you're predicated on buying the other 579 00:29:33,560 --> 00:29:36,200 Speaker 5: real estate ASCID classes at a four percent cap rate, 580 00:29:36,560 --> 00:29:38,880 Speaker 5: which used to need a three percent interest rate to 581 00:29:38,960 --> 00:29:42,480 Speaker 5: make it work, you're way under water in terms of 582 00:29:42,560 --> 00:29:45,080 Speaker 5: that spread between whether cap rates and the interest rates 583 00:29:45,120 --> 00:29:46,120 Speaker 5: are now interesting. 584 00:29:47,000 --> 00:29:49,040 Speaker 4: Go ahead, and I'm just fascinating stuff. There's so many 585 00:29:49,040 --> 00:29:51,440 Speaker 4: different areas in little tranches and slices of the. 586 00:29:52,440 --> 00:29:54,600 Speaker 2: Yeah, it is really interesting. Sean, thank you so much. 587 00:29:54,640 --> 00:29:57,520 Speaker 2: I really appreciate it. Sean Air is principal managing a 588 00:29:57,600 --> 00:30:01,520 Speaker 2: managing partner at Trinity Investments, talking a lot about the 589 00:30:01,720 --> 00:30:05,720 Speaker 2: state of commercial real estate when it comes to luxury hotels. 590 00:30:05,920 --> 00:30:08,360 Speaker 2: I don't remember the last time I feel like I've traveled. 591 00:30:08,400 --> 00:30:09,200 Speaker 2: It's been so long. 592 00:30:09,440 --> 00:30:13,600 Speaker 4: We were down in the Nashville. Yeah, we were were 593 00:30:13,680 --> 00:30:15,920 Speaker 4: the Lord I mean Operland Resort. 594 00:30:16,080 --> 00:30:19,040 Speaker 2: I mean I clocked like fourteen thousand steps one day, 595 00:30:19,240 --> 00:30:21,440 Speaker 2: just like being a person walking around that hotel. 596 00:30:22,960 --> 00:30:26,840 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 597 00:30:26,960 --> 00:30:30,720 Speaker 1: weekdays at ten am Eastern on applecar Play and Android Auto. 598 00:30:30,880 --> 00:30:33,640 Speaker 1: With the Bloomberg Business app. You can also listen live 599 00:30:33,760 --> 00:30:36,880 Speaker 1: on Amazon Alexa from our flagship New York station, Just 600 00:30:37,000 --> 00:30:39,880 Speaker 1: say Alexa playing Bloomberg eleven thirty. 601 00:30:41,600 --> 00:30:43,800 Speaker 2: And here we go. One of my favorite stories of 602 00:30:43,880 --> 00:30:47,080 Speaker 2: the last forty eight hours is what's happening in luxury 603 00:30:47,280 --> 00:30:49,280 Speaker 2: retail or? MEZ is going to be reporting after the 604 00:30:49,320 --> 00:30:52,400 Speaker 2: closing bell in Europe, so that's after eleven thirty Eastern 605 00:30:52,560 --> 00:30:57,040 Speaker 2: our time. We had the likes of all the other guys. 606 00:30:57,040 --> 00:30:59,280 Speaker 2: Who are the other guys now? Richmond not doing really well, 607 00:31:00,520 --> 00:31:04,560 Speaker 2: Gucci sales disappointed, and that wound up hurting, carrying their 608 00:31:04,680 --> 00:31:10,120 Speaker 2: parent company LVMH also struggling. I mean it's grim out there. 609 00:31:10,240 --> 00:31:13,480 Speaker 2: Debora Aigan is Boomberg Intelligence Luxury Goods analyst and she 610 00:31:13,680 --> 00:31:16,640 Speaker 2: joins us on this topic. Deborah, how much of the 611 00:31:16,720 --> 00:31:20,600 Speaker 2: weakness is a China problem versus a broader problem? 612 00:31:22,920 --> 00:31:27,719 Speaker 6: Hi, Yes, some of the weakness is a China problem, 613 00:31:28,040 --> 00:31:30,800 Speaker 6: but I would say it's around ten percent of the 614 00:31:30,920 --> 00:31:34,240 Speaker 6: problem at the moment, because we were already against a 615 00:31:34,360 --> 00:31:37,840 Speaker 6: difficult base last year where we saw only the market 616 00:31:37,920 --> 00:31:41,280 Speaker 6: only open in January last year doing well until it 617 00:31:41,360 --> 00:31:44,800 Speaker 6: took a while for stores to build again in China, 618 00:31:45,920 --> 00:31:48,400 Speaker 6: and then we saw a drop off May June picked 619 00:31:48,480 --> 00:31:50,960 Speaker 6: up a little bit more. By September three, December it 620 00:31:51,080 --> 00:31:54,040 Speaker 6: contracted again, and I would say that into Q two 621 00:31:54,080 --> 00:31:56,720 Speaker 6: were actually probably flat in China. 622 00:31:58,000 --> 00:31:58,600 Speaker 2: Year on year. 623 00:31:59,520 --> 00:32:02,200 Speaker 6: But what we have is actually some of the Chinese 624 00:32:02,720 --> 00:32:07,920 Speaker 6: cohort some travel to Europe, but especially and particularly travel 625 00:32:08,000 --> 00:32:12,440 Speaker 6: to Japan, and that is skewing numbers. And there's there's 626 00:32:12,480 --> 00:32:14,160 Speaker 6: more into that that we can talk about. 627 00:32:14,720 --> 00:32:17,640 Speaker 4: So, I mean, I guess the question is what are 628 00:32:17,680 --> 00:32:19,560 Speaker 4: these luxury brands? I mean, they've had a good run. 629 00:32:19,720 --> 00:32:21,200 Speaker 4: Is this just kind of getting back to maybe a 630 00:32:21,360 --> 00:32:27,360 Speaker 4: more normalized spending pattern by typical luxury consumers or is 631 00:32:27,400 --> 00:32:29,320 Speaker 4: there something else going on here? Because I can get 632 00:32:29,360 --> 00:32:33,400 Speaker 4: a Gucci Jackie nineteen sixty one medium shoulder bag for 633 00:32:33,520 --> 00:32:34,560 Speaker 4: thirty nine hundred bucks? 634 00:32:34,720 --> 00:32:35,440 Speaker 7: Would you want you? 635 00:32:35,880 --> 00:32:35,920 Speaker 6: What? 636 00:32:36,240 --> 00:32:36,560 Speaker 4: How about? 637 00:32:37,080 --> 00:32:39,080 Speaker 2: What just happened here? Did you look up luxury retime? 638 00:32:39,160 --> 00:32:41,880 Speaker 4: I'm looking at the Gucci site here, the Gucci Jackie 639 00:32:42,000 --> 00:32:44,360 Speaker 4: nineteen sixty one medium shoulder bag. Tom Keen was looking 640 00:32:44,360 --> 00:32:47,720 Speaker 4: at this this morning, thirty nine hundred bucks. So what 641 00:32:47,920 --> 00:32:48,440 Speaker 4: happens here? 642 00:32:49,560 --> 00:32:52,440 Speaker 6: Right? So probably two stories here. So well, let's tooch 643 00:32:52,520 --> 00:32:55,680 Speaker 6: on Gucci afterwards, but let me just run through some 644 00:32:55,840 --> 00:32:58,680 Speaker 6: numbers to put what's happening in this quarter and this 645 00:32:58,840 --> 00:33:02,040 Speaker 6: half year into contact. So we started twenty twenty four 646 00:33:02,120 --> 00:33:04,000 Speaker 6: by saying this would very much be a tale of 647 00:33:04,080 --> 00:33:07,600 Speaker 6: two halves, and so I want to remind about what 648 00:33:07,840 --> 00:33:10,840 Speaker 6: that means, because in the first half of twenty twenty three, 649 00:33:11,600 --> 00:33:15,440 Speaker 6: the luxury marker grew twenty percent twenty percent in Q 650 00:33:15,600 --> 00:33:17,560 Speaker 6: one and nineteen and a half percent in Q two. 651 00:33:18,080 --> 00:33:20,320 Speaker 6: By Q three and Q four because of the skew 652 00:33:20,480 --> 00:33:23,400 Speaker 6: year on yure it grew ten percent average. So as 653 00:33:23,440 --> 00:33:25,880 Speaker 6: we head into the second half, we'll be looking at 654 00:33:25,920 --> 00:33:28,479 Speaker 6: it facing ten percent rather than twenty percent which are 655 00:33:28,480 --> 00:33:31,440 Speaker 6: faced in the first In the first half of this year, 656 00:33:31,840 --> 00:33:33,640 Speaker 6: and so in Q on this year it came through 657 00:33:33,720 --> 00:33:36,800 Speaker 6: with almost seven percent growth. In Q two, we've only 658 00:33:36,840 --> 00:33:39,560 Speaker 6: got six numbers so far, six of the big reporters, 659 00:33:40,000 --> 00:33:42,520 Speaker 6: and they're at one percent. So that's what you're referring 660 00:33:42,560 --> 00:33:45,240 Speaker 6: to when you say, you know, Richmond's only a one 661 00:33:45,320 --> 00:33:48,680 Speaker 6: percent ALVIU majors of one percent, because they're up against 662 00:33:48,760 --> 00:33:53,160 Speaker 6: nineteen percent and seventeen percent respectively four quarters ago. So 663 00:33:53,320 --> 00:33:56,520 Speaker 6: that's the issue there. The second thing on China, so 664 00:33:56,680 --> 00:34:00,760 Speaker 6: we know that China numbers are about flat where double 665 00:34:00,800 --> 00:34:03,240 Speaker 6: digit year on year, but about flat, and that we're 666 00:34:03,240 --> 00:34:06,320 Speaker 6: seeing actually the Chinese cohort a lot of that spend elsewhere. 667 00:34:06,800 --> 00:34:09,399 Speaker 6: And then if we think about Gucci, Gucci, I'm going 668 00:34:09,440 --> 00:34:11,879 Speaker 6: to put that aligned to a Burbery which is also 669 00:34:12,040 --> 00:34:15,319 Speaker 6: very difficult, or a Ferragamo which comes out next week, 670 00:34:15,640 --> 00:34:19,520 Speaker 6: where it's about really rebuilding and elevating the brand. And 671 00:34:19,960 --> 00:34:22,360 Speaker 6: for me, Birbery, you have got it most wrong. And 672 00:34:22,480 --> 00:34:25,200 Speaker 6: Gucci could do something by Q three Q four with 673 00:34:25,320 --> 00:34:28,680 Speaker 6: new product in the marketplace, but it's a difficult area 674 00:34:28,760 --> 00:34:31,760 Speaker 6: when you're trying to persuade not your own retail stores 675 00:34:31,800 --> 00:34:35,640 Speaker 6: but the wholesale store. So a boutique could department store 676 00:34:36,000 --> 00:34:40,240 Speaker 6: to take the risk of new, untested design on board 677 00:34:40,280 --> 00:34:43,200 Speaker 6: at a time when there's real uncertainty about new designers 678 00:34:43,239 --> 00:34:44,480 Speaker 6: and whether they've made it or not. 679 00:34:45,040 --> 00:34:47,279 Speaker 2: It's such a good that makes sense. It does make sense. 680 00:34:47,640 --> 00:34:50,600 Speaker 2: The one outlier, though, has been our maz has continued 681 00:34:50,680 --> 00:34:53,960 Speaker 2: to deliver, albeit maybe at a slower pace. They're going 682 00:34:54,040 --> 00:34:56,359 Speaker 2: to report earnings in it's about fifteen minutes, give or take. 683 00:34:57,200 --> 00:34:58,399 Speaker 2: What do you think we're going to see there? 684 00:35:00,160 --> 00:35:02,799 Speaker 6: I think much of the same from MS, there will 685 00:35:02,880 --> 00:35:08,120 Speaker 6: be some slight slowdown I think in things like accessories 686 00:35:08,320 --> 00:35:12,120 Speaker 6: for example, silks for example, maybe a little bit in 687 00:35:12,200 --> 00:35:15,200 Speaker 6: perfumes and cosmetics. It depends on where they are. You're 688 00:35:15,320 --> 00:35:18,560 Speaker 6: on your category by category with growth rates. But there's 689 00:35:18,560 --> 00:35:20,480 Speaker 6: another one too which we can use to add some 690 00:35:20,600 --> 00:35:23,800 Speaker 6: confidence for MS. That would be Brunello Cucinelli, which was 691 00:35:23,840 --> 00:35:26,080 Speaker 6: one of the first to report and it came through 692 00:35:26,160 --> 00:35:29,000 Speaker 6: with twelve percent growth of twenty eight percent last year. 693 00:35:29,400 --> 00:35:32,640 Speaker 6: So it's very high end. So anything that's high end. 694 00:35:33,320 --> 00:35:35,480 Speaker 6: The consumer at the very high end is not so 695 00:35:35,640 --> 00:35:38,800 Speaker 6: worried by prices having gone up eight to ten percent 696 00:35:39,320 --> 00:35:41,520 Speaker 6: over the last couple of years. They're not so worried 697 00:35:41,600 --> 00:35:46,360 Speaker 6: by monthly income coming in. Those with high spend and power, 698 00:35:46,480 --> 00:35:50,160 Speaker 6: they're still looking for, you know, to treat themselves for 699 00:35:50,239 --> 00:35:53,239 Speaker 6: that luxury feel, and that's what's holding out. We also 700 00:35:53,400 --> 00:35:57,120 Speaker 6: saw the rich Monozoni up, as we said, one percent 701 00:35:57,640 --> 00:36:01,240 Speaker 6: in this quarter. If you look behind those numbers, Cartier 702 00:36:01,400 --> 00:36:04,080 Speaker 6: was still very strong and Van Kleef and Arpels very strong. 703 00:36:04,440 --> 00:36:08,319 Speaker 6: It was more their accessories and fashion side of things 704 00:36:08,400 --> 00:36:10,600 Speaker 6: that saw more of a dip, you know, not so 705 00:36:10,760 --> 00:36:14,160 Speaker 6: strong growth because the middle ground is just contested. There's 706 00:36:14,239 --> 00:36:19,120 Speaker 6: uncertainty there around elections, the macro view, it's all tying together. 707 00:36:19,160 --> 00:36:22,520 Speaker 6: But second half structurally becomes a lot easier for these companies. 708 00:36:23,480 --> 00:36:25,600 Speaker 4: When I was back in my tiwering days, I was 709 00:36:25,640 --> 00:36:28,000 Speaker 4: at RMEZ type person that was my go to super 710 00:36:28,080 --> 00:36:31,040 Speaker 4: solid brand. Yeah, saw that's a Wall Street standard back 711 00:36:31,080 --> 00:36:31,440 Speaker 4: in the day. 712 00:36:32,239 --> 00:36:34,400 Speaker 6: And then you know there's another thing that runs on 713 00:36:34,480 --> 00:36:36,200 Speaker 6: this because I'm going to I think, be like really 714 00:36:36,280 --> 00:36:39,840 Speaker 6: focusing on what happens on operations. Some of these companies 715 00:36:39,880 --> 00:36:43,400 Speaker 6: have forty percent margin down to twenty five percent average 716 00:36:43,400 --> 00:36:46,319 Speaker 6: across the sector. I think where we're getting a lot 717 00:36:46,400 --> 00:36:49,320 Speaker 6: more of Asian you know, Asia and overall is around 718 00:36:49,320 --> 00:36:51,840 Speaker 6: a third of the luxury market, and we're getting a 719 00:36:51,880 --> 00:36:54,440 Speaker 6: lot more of that spend into Japan. And if you 720 00:36:54,520 --> 00:36:57,839 Speaker 6: think about the translation of these big euro companies, Euro 721 00:36:57,960 --> 00:37:00,680 Speaker 6: based companies, the end being so week has kind of 722 00:37:00,719 --> 00:37:04,080 Speaker 6: given you an equivalent one to one eurot yen in 723 00:37:04,200 --> 00:37:06,520 Speaker 6: terms of pricing, whereas if you were buying in China 724 00:37:06,680 --> 00:37:09,120 Speaker 6: in Hong Kong, you were getting one point two, so 725 00:37:09,239 --> 00:37:11,879 Speaker 6: the conversion was one point two. So that also hits 726 00:37:11,960 --> 00:37:14,640 Speaker 6: the top line in terms of value growth. 727 00:37:15,800 --> 00:37:19,000 Speaker 4: Yeah, back in the day, Hey rock Quicks, how about 728 00:37:19,080 --> 00:37:22,160 Speaker 4: like Saudi Arabia, United Arab Emirates do buy that part 729 00:37:22,200 --> 00:37:24,640 Speaker 4: of the world. It seems like there's lots of cash 730 00:37:24,719 --> 00:37:26,839 Speaker 4: there is that a big, big market for luxury. 731 00:37:28,600 --> 00:37:30,280 Speaker 6: If we bring it, if we bring it all together, 732 00:37:30,360 --> 00:37:33,040 Speaker 6: it's probably moving towards six to seven percent, So you 733 00:37:33,080 --> 00:37:35,560 Speaker 6: would say it's one of the bigger or just above 734 00:37:35,600 --> 00:37:41,600 Speaker 6: the biggest European contingent. But it's certainly growing. A huge 735 00:37:41,600 --> 00:37:45,479 Speaker 6: amount of investment moving into their more so money coming 736 00:37:45,560 --> 00:37:50,240 Speaker 6: in from from Russia, from a different parts of Eastern Europe, 737 00:37:50,320 --> 00:37:55,200 Speaker 6: from parts of Middle East into into where you know 738 00:37:55,280 --> 00:37:59,279 Speaker 6: where they can't spend in particular areas. So there's a 739 00:37:59,320 --> 00:38:01,400 Speaker 6: lot of infrastr actually taking place in a lot of 740 00:38:01,640 --> 00:38:05,440 Speaker 6: new joint ventures and others being written in those areas too, 741 00:38:05,520 --> 00:38:08,040 Speaker 6: which I see has been strong over the next three 742 00:38:08,080 --> 00:38:10,520 Speaker 6: to five years. Similarly, we'll be looking five years on 743 00:38:10,719 --> 00:38:13,600 Speaker 6: India as well as an upcoming market. 744 00:38:13,840 --> 00:38:15,560 Speaker 4: All right, thanks so much for joining us. That making 745 00:38:15,560 --> 00:38:18,719 Speaker 4: Bloomberg Intelligence covers all the luxury brands for us. I'm 746 00:38:18,760 --> 00:38:22,759 Speaker 4: looking on Themez site pre pandemic. When I was wearing 747 00:38:22,840 --> 00:38:28,120 Speaker 4: ties two hundred dollars for now they're to sixty. So's too, 748 00:38:28,200 --> 00:38:31,120 Speaker 4: mach no, and I think any last you know, for 749 00:38:31,160 --> 00:38:33,279 Speaker 4: amount time, Yeah, they're good, and you know it's but 750 00:38:33,440 --> 00:38:35,840 Speaker 4: that's you know. But I'm just looking at the inflation 751 00:38:35,880 --> 00:38:38,240 Speaker 4: because again I was at two hundred. John's laughing. 752 00:38:38,920 --> 00:38:41,120 Speaker 2: I mean, I'm looking at Bruno Cucinelli. Where you're gonna 753 00:38:41,120 --> 00:38:43,919 Speaker 2: pay two grand for a man Cardigan. I mean, really, 754 00:38:44,040 --> 00:38:46,279 Speaker 2: that just blows my tiny brain. I just don't get it. 755 00:38:46,320 --> 00:38:46,839 Speaker 7: You're luxury. 756 00:38:46,880 --> 00:38:49,960 Speaker 4: I'm like, I don't know. Magic. 757 00:38:50,760 --> 00:38:55,359 Speaker 1: This is the Bloomberg Intelligence podcast, available on Apples, spotder Pye, 758 00:38:55,480 --> 00:38:58,640 Speaker 1: and anywhere else you'll get your podcasts. Listen live each 759 00:38:58,719 --> 00:39:01,879 Speaker 1: weekday ten am to and Eastern on Bloomberg dot Com, 760 00:39:02,200 --> 00:39:05,560 Speaker 1: the iHeartRadio app, tune In, and the Bloomberg Business app. 761 00:39:05,719 --> 00:39:08,680 Speaker 1: You can also watch us live every weekday on YouTube 762 00:39:08,920 --> 00:39:10,720 Speaker 1: and always on the Bloomberg terminal