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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Surveillance Podcast. Catch us live weekdays at seven am Eastern

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Speaker 1: on Apple CarPlay or Android Auto with the Bloomberg Business App.

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Speaker 1: Listen on demand wherever you get your podcasts, or watch

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Speaker 1: us live on YouTube.

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Speaker 2: Joining us right now with Golden's success at management, Kay

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Speaker 2: joins us here, you're out of London, out of Bristol.

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Speaker 2: You are out of the land of central bank descent.

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Speaker 2: I love when the Bank of England comes out. Everybody's angry,

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Speaker 2: everybody's arguing, do you see where you sit and where

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Speaker 2: you digest? Jan Hatzi is economics. Do you see a FED?

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Speaker 2: It's going to become more like the Bank of England.

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Speaker 2: Welcome morning. It's tough to tell at this stage.

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Speaker 3: Would be very interesting to see actually how today's meeting goes.

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Speaker 3: I think give us a little bit of a flavor

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Speaker 3: of what is to come. I think the market understands

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Speaker 3: very clearly that you know there's going to be less

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Speaker 3: forward guidance going forward, but the market still needs to

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Speaker 3: figure out what that means in terms of kind of

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Speaker 3: policy and reaction functions. So let's be open minded about that.

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Speaker 3: But it is it is really very likely to your point,

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Speaker 3: that we're going to get a little bit more volatility

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Speaker 3: at the short end going forward, given the way the

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Speaker 3: Fed's likely to communicate.

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Speaker 4: Your market you're fixing car markets. I mean, it's been

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Speaker 4: higher for longer. Is that the new world for you guys?

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Speaker 4: Higher for longer? Here I'm looking at the ten year

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Speaker 4: at four to sixty something. I mean, that's not I

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Speaker 4: kind of thought the four fifty was my ceiling and

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Speaker 4: then blue you guys will right past that.

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Speaker 3: Well, there's a couple of things going on. First of all,

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Speaker 3: short end rates are likely to be higher. Inflation is higher,

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Speaker 3: not just in the US around the world, but inflation

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Speaker 3: is higher and stickier. And then, of course, now we've

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Speaker 3: got the commodity price shock that is propagating to the economy,

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Speaker 3: so that lifts the shorter end of the curve. And

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Speaker 3: then you know, we've got a lot of supply coming

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Speaker 3: at the long end of the curve, a from fiscal

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Speaker 3: so governments are issuing more. But you see it in

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Speaker 3: the in the ITG market as well. You see the

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Speaker 3: corporate market issue and more, particularly higher scalers at the

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Speaker 3: long end, So that puts pressure.

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Speaker 4: And your Banker's been busy. Mortu is the only bankers

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Speaker 4: JP Morgan Banker has been busy pumping out all this

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Speaker 4: technology paper. Here. Where do you see the best value?

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Speaker 4: I guess on a global scale? Is it the US market?

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Speaker 4: Where do you see the value today?

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Speaker 2: So I think their pockets of value globally.

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Speaker 3: If you're thinking of the paper that's being pumped out,

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Speaker 3: I think on the IG side, I think it's very

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Speaker 3: important to just keep in mind that there's going to

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Speaker 3: be a lot of this coming. You know, we kind

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Speaker 3: of look at the numbers to about twenty thirty expectations

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Speaker 3: you're going to see something like an additional one point

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Speaker 3: four trillion and compare that to the eight trillion that

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Speaker 3: you have in the kind of Bloomberg IG index. That's

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Speaker 3: a that's a big number. So where what is the value?

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Speaker 3: I think you have to says the value on an

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Speaker 3: individual basis? Typically, you know what matters other details in

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Speaker 3: the number of these deals, the maturities of these deals,

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Speaker 3: the leases, the states in which you know some of

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Speaker 3: these projects are being built. So you know, selection and

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Speaker 3: getting actually into the weeds of individual deals is going

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Speaker 3: to be the driver, because that the volume is gigantic,

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Speaker 3: and the bondholders will be very discerning when it comes

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Speaker 3: to buying this paper.

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Speaker 2: What does the signal you see in a hyperscale or

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Speaker 2: priced down in some of the CDs elevation that we

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Speaker 2: see when you look at technology paper, can you add

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Speaker 2: those positions with new issuance or existing issuance.

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Speaker 3: Well, coming back to the point that there's going to

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Speaker 3: be a lot more where this paper comes from. So

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Speaker 3: one shift you've actually seen is that the risk premium

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Speaker 3: that the bond market commands is going up over time. Right,

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Speaker 3: So the spreads are not only wider, but the spread

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Speaker 3: curve is steeper. Now that's a good thing because the

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Speaker 3: market is beginning to command the right risk premium and

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Speaker 3: the breakdown between your what the equity market gets. So

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Speaker 3: this is the fixation.

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Speaker 2: Okay, this is the heart of the matter. You just

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Speaker 2: brilliantly said it. We've got a new steeper normal curve,

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Speaker 2: and your Danny on Friday said, get used to it.

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Speaker 2: This is normal. Is that where Goldman sex is. All

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Speaker 2: we're doing is reverting to a normal market.

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Speaker 3: I think I think it's likely that the issues will

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Speaker 3: drive a more normal kind of issues pattern one and

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Speaker 3: that will put pressure at the longer end of the curve.

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Speaker 2: Well, that's that to me is the foundational idea. I

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Speaker 2: mean the issue is is price discovery simple as.

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Speaker 4: That assets under management of g SAM. What is the

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Speaker 4: total number for you guys in in wealth management or

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Speaker 4: trillion dollars? Geez I remember you were running equity moneys

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Speaker 4: out of Tampa, Florida back in the day. What are

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Speaker 4: the macro forces here? The big economic macro forces that

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Speaker 4: you guys are focused on right now? Is it? Is

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Speaker 4: it global inflation? Is what's some of the issues that

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Speaker 4: are really first and foremost for your portfolio mention?

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Speaker 3: So one thing we're seeing in the kind of perse

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Speaker 3: q e world is a lot more differentiation. So we

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Speaker 3: started maybe mentioning the Bank of England. We've we've got

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Speaker 3: a Bank of England meeting actually this week. We've got

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Speaker 3: Bank of Japan also coming this week. We're seeing a

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Speaker 3: lot of differentiation what's priced in. It's becoming a lot

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Speaker 3: more kind of volatile, particularly at the short end. So

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Speaker 3: that's that's the first big thing. What drives it? Well,

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Speaker 3: we're going to learn a lot more about what drives

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Speaker 3: in the US today so that the reaction functions are changing.

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Speaker 3: You've got the task force in particularly in the US

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Speaker 3: that will look at a lot of the kind of

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Speaker 3: fundamentals and frameworks as to what's driving Do you.

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Speaker 2: See anything done? I mean, what do they call it

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Speaker 2: task force in England? Why why do they call it

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Speaker 2: task force? Is it called a task force? I think?

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Speaker 2: Are they going to get anything done? You've got to

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Speaker 2: be kidding England.

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Speaker 4: They and they figured it out exactly.

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Speaker 2: I mean, that's the way to do it, you know, like.

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Speaker 3: Consulting a little bit. It's not a bad idea, right,

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Speaker 3: the world has changed.

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Speaker 2: It's okay, you know exactly, Okay, thank you so much.

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Speaker 2: Kay with this consulting for Golden Sex asset managers and

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Speaker 2: lunch Now in New York. We got him on a

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Speaker 2: daily basis exactly. Stay with us. More from Bloomberg Surveillance

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Speaker 2: coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Apple Karplay and Android Auto with the Bloomberg Business app,

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Speaker 1: or watch us live on YouTube and.

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Speaker 2: Why it joins us from Charlotte, North Carolina. Of course,

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Speaker 2: all the work of Huntington Bank of Columbus as well. Okay,

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Speaker 2: thirty three percent of active listings in Charlotte have undergone

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Speaker 2: price cuts before selling. I mean there's a whole housing

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Speaker 2: price dynamic involved here. Does the FED care about the

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Speaker 2: housing economy within their decision today?

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Speaker 5: Right now? I don't see housing as well. There's some

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Speaker 5: cuts and housing softened. I do think that that matters

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Speaker 5: for the consumers, especially on the rental side. If we

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Speaker 5: look at where the inflation is happening and housing, if

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Speaker 5: you break out the shelter components, you can see it's

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Speaker 5: not really in the rental side. It's in Funnily enough,

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Speaker 5: the housing component of CPI includes hotels for example, it

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Speaker 5: includes insurance, it includes all the costs of housing, and

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Speaker 5: so we're seeing it there, and that's keewing more upper income.

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Speaker 5: So as far as you know lower income consumers, the

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Speaker 5: average consumer, I think they do care that that rents

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Speaker 5: are not a big pressure right now, and for a

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Speaker 5: lot of lower income households that's a really big deal

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Speaker 5: on the spending side too, And I think we're seeing

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Speaker 5: that in the spending data right now as well, is

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Speaker 5: that those households are still spending. But I think right now, yes,

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Speaker 5: the FED is obviously focused on inflation. The jobs pictures, okay,

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Speaker 5: and that's partly because those households are still spending. You know,

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Speaker 5: they add a pretty good tax cut coming, we had

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Speaker 5: the refunds, and we've seen pretty solid spending data. In fact,

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Speaker 5: all the recent spending data is skewing more lower income.

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Speaker 5: Is actually growth is faster amongst lower middle income than

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Speaker 5: upper income household.

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Speaker 4: So does that mean the case shaped economy, which we've

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Speaker 4: talked about for so long, is that less of an

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Speaker 4: issue now? It would seem that with higher inflation it

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Speaker 4: would be more of an issue.

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Speaker 5: Yeah, you'd think that now. I think part of it

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Speaker 5: was we probably underestimated how bad rent was back in

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Speaker 5: the day for these households and how much government stimulus

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Speaker 5: will was withdrawn because sometimes we're somewhat separated from that.

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Speaker 5: So you's huge rental inflation and for a decent no,

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Speaker 5: the CBI says, you know, your rent's roughly and housing

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Speaker 5: is roughly a thirty year spending, But for a lot

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Speaker 5: of households at the lower income it's fifty percent. You're

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Speaker 5: talking thirty five percent of them are spending more than

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Speaker 5: thirty five percent, So it's a bigger deal, and that's

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Speaker 5: not a per inflationary pressure, whereas gasoline in a good

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Speaker 5: year is four percent of their spending four percent.

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Speaker 2: So let it's up to five or six now, and

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Speaker 2: you're so good at this, let me set up the

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Speaker 2: popolarity on this. The present of the United States is

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Speaker 2: worried about real estate prices in the bottom half in

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Speaker 2: North Carolina because you know, his team's got to get

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Speaker 2: re elected. Wall Street is worried about price increases in

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Speaker 2: the Hamptons because boneie seasons are killing everybody. That's the

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Speaker 2: Barbelle polarity of America. Who does Chairman warsh address today?

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Speaker 2: Fancy people in the Hamptons or mere Mortals forty miles

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Speaker 2: outside Charlotte who can barely get by.

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Speaker 5: I think Chair Warsh is and in general, this FED

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Speaker 5: has become less focused on Wall Street over time and

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Speaker 5: what the markets are doing now. Obviously the chair has

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Speaker 5: spoken a bit about having the bond market lead rather

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Speaker 5: than follow the FED. But the reality is when we

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Speaker 5: look at their reaction function as far as the job side,

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Speaker 5: the other side of the mandate, back in September they

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Speaker 5: cut and the previous September they cut because what they

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Speaker 5: saw was softness in the labor market that really isn't

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Speaker 5: coming through when you read whether it's the Beige Book

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Speaker 5: or other job reports. Really it's a fairly stable labor market.

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Speaker 5: We maybe job growth has slowed a little, or maybe

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Speaker 5: it was just you know, sort of some of the

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Speaker 5: noise in the data. We had a bit faster job

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Speaker 5: growth for three four months, and now we had kind

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Speaker 5: of a softer month in July, I mean in June.

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Speaker 5: So they're looking at that, but they don't really see

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Speaker 5: that as an issue right now. So they see them

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Speaker 5: as having one issue, and that's why the bias is

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Speaker 5: towards the upside on rates. It's simply that they don't

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Speaker 5: see the other side of the mandate as a problem.

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Speaker 5: And so if you only see one side of the

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Speaker 5: mandate as a problem, you're going to be biased towards

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Speaker 5: upside on rates. At the same time, I think they

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Speaker 5: see this. We see this in forecasts, not just US

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Speaker 5: but other forecasters as well, is that we see inflation

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Speaker 5: coming down. And so that's why we think this is

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Speaker 5: an easy call today.

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Speaker 4: Okay, all right, you're at Huntington Bank. With some of

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Speaker 4: your recent acquisitions, You guys are a solid kind of

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Speaker 4: big regional bank. What are your customers telling you? Are

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Speaker 4: your customers are they Are they coming to you guys

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Speaker 4: knocking on the door looking for loans? Do they want

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Speaker 4: to grow? Do they want to invest? What are you

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Speaker 4: guys seeing?

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Speaker 5: Yes, I work a lot with our commercial clients. Really

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Speaker 5: where the part of the organization I work with. So

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Speaker 5: I'm working with companies all the time, talking to them

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Speaker 5: out there all over the country. And yeah, we're we're

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Speaker 5: everywhere from Houston to Jacksonville now in the South, we're

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Speaker 5: out in Denver. We're a pretty large bank. We're legally

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Speaker 5: a large bed now too. So what they're telling us

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Speaker 5: is data centers is weirdly permeating almost any industry you

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Speaker 5: wouldn't expect. And so it's something like, you know, we

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Speaker 5: were talking to somebody who owned a pipeline right away,

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Speaker 5: and all of a sudden, that guest pipeline right away

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Speaker 5: got really valuable because all of a sudden, there's going

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Speaker 5: to be a huge amount of gas generation because there's

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Speaker 5: going to be a data centers, large data center being

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Speaker 5: built on the other end. Or you know, somebody who

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Speaker 5: makes equipment that creates aggregate, like they crush rocks for gravel.

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Speaker 2: You wouldn't think that.

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Speaker 5: Telling me thirty five forty percent of our business right

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Speaker 5: now is data centers just for and almost any weird.

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Speaker 5: It's it's weird how often I have that conversation. I've

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Speaker 5: been rather shocked by how often I've had that conversation.

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Speaker 5: And especially it's it's really in our core footprint where

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Speaker 5: a lot of the data centers are happening. It's whether

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Speaker 5: it's the southeast or the Midwest.

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Speaker 2: Ian, thank you so much, you know why with his

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Speaker 2: chief economist wing to that bank. Stay with us. More

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Speaker 2: from Bloomberg Surveillance coming up after this.

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Speaker 1: You're listening to the Bloomberg Surveillance podcast. Catch us Live

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Speaker 1: weekday afternoons from seven to ten am Eastern Listen on

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Speaker 1: Applecarplay and Android Auto with the Bloomberg Business app, or

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Speaker 1: watch us live on YouTube in plain.

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Speaker 2: English, Ian Lingoln holds a high ground at BEMO Capital Markets,

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Speaker 2: the Bank of Montreal ahead of US rates strategy that

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Speaker 2: barely describes it. You allude lower in your note, and

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Speaker 2: I've been saying this all week. The most important thing

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Speaker 2: about July twenty ninth is September sixteenth, October twenty eighth

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Speaker 2: December ninth, how badly does this chairman need more CPI information?

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Speaker 4: Wild card?

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Speaker 6: If he truly believes that our star is higher as

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Speaker 6: a result of the data that we've seen thus far

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Speaker 6: in twenty twenty six, then now's a reasonable time to

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Speaker 6: start pushing policy rates higher. But if they go once,

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Speaker 6: the market's going to price in another three or four And.

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Speaker 2: This is the second time this has come up in

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Speaker 2: twelve hours. If they go once, why can't he release

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Speaker 2: the statement and then then then the press conference say

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Speaker 2: this is a one off that we did today.

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Speaker 6: That sounds suspiciously like forward guidance. And I think that

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Speaker 6: he would be reluctant to do just that because the

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Speaker 6: other aspect of it is the FED gets the joke.

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Speaker 6: Twenty five basis points when policy rates are where they are,

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Speaker 6: really isn't going to move the needle. We also know

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Speaker 6: that policy that policy changes impact the real economy with

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Speaker 6: a lag. And if you're hiking twenty five basis points, now,

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Speaker 6: are you really that worried about what the world's going

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Speaker 6: to look like at the end of the year. It

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Speaker 6: seems like a more significant policy lag is going to

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Speaker 6: be for the gentleman in Pennsylvania Avenue the lag is

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Speaker 6: going to wait to the first Tuesday of November.

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Speaker 4: Exactly why. I've heard this before that when the FED moves,

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Speaker 4: attend to move not just one move, but multiple Why

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Speaker 4: is that? Why don't they just why do they feel

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Speaker 4: the need or to do two or three or four?

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Speaker 6: If you're going to do one, envision a scenario in

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Speaker 6: which they go twenty five today, we wait two meetings

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Speaker 6: and then they cut twenty five because the data suggested

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Speaker 6: that that was the case. You have, You then have

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Speaker 6: the perception of a FED that doesn't really know what's

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Speaker 6: going on, and so they're responding to each incremental move.

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Speaker 6: And that's why patience is such a powerful tool. By

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Speaker 6: not responding to what we saw earlier this year in

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Speaker 6: terms of an uptick in inflation, nor responding to June's data,

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Speaker 6: the FED has an implied degree of credibility that I

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Speaker 6: think they want to maintain.

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Speaker 4: Personally, I'm a big fan of procrastination, kicking the can

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Speaker 4: down the road. How does a FED think about that?

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Speaker 6: Suspect that in this environment in which Warsh is still

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Speaker 6: trying to build a consensus around a lot of things,

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Speaker 6: that patients will be the path of least resistance but

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Speaker 6: there's also again the credibility issue. If in fact we

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Speaker 6: believe that neutral is higher, we need to get back

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Speaker 6: there more quickly.

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Speaker 2: I'm fascinating ian by what the bond market tells you

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Speaker 2: looking at your four Bloombergs. It be most capital markets

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Speaker 2: not only full faith and credit, but when you look

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Speaker 2: at credit, hyperscale, credit, CDs, all of it. What does

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Speaker 2: the market tell you about this moment for sharing wash.

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Speaker 6: I think that the Chair has really established himself as

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Speaker 6: a credible inflation fighter, or at least not a clear

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Speaker 6: dove because of who's in the White House at the moment.

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Speaker 6: That was his first meeting. He reiterated that at the

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Speaker 6: semi annual Congressional testimony. And now the question is, if

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Speaker 6: we really believe that the Fed is going to contain

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Speaker 6: inflation over time, you don't want to buy thirty year

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Speaker 6: inflation protection, which is why real thirty year yields are

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Speaker 6: as high as they are. I think that's a very

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Speaker 6: informative aspect of what's going on in the market right now.

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Speaker 6: That also speaks to some of the hyper scale issuance

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Speaker 6: or hyperscaler issuance and what that's doing to the broader

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Speaker 6: bond market right now. I do think that the market

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Speaker 6: is a bit a bit uncertain about the outlook, and

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Speaker 6: a lot of clients and a lot of people are

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Speaker 6: just taking a step back and they're letting the monetary

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Speaker 6: policy situation play out right now.

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Speaker 4: Again, I'm a big fan of just sitting on my

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Speaker 4: hands here. So if I'm telling talking to the FED

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Speaker 4: chairman watsh today, I would say, the market's already moved

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Speaker 4: that at the ten year four to sixty two, we

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Speaker 4: can we can sit on our hands here. Does that

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Speaker 4: argument have any weight? Do you think?

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Speaker 6: Well, the treasury market has been doing a fair amount

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Speaker 6: of heavy lifting for the Fed. But the issue is

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Speaker 6: the equity market is pushing the other direction. Financial conditions

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Speaker 6: are still relatively easy overall.

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Speaker 2: Can I stop the show? So the magic here, folks,

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Speaker 2: is Paul say something smart. Ian says something smarter, and

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Speaker 2: I go to the Bloomberg and actually get the picture

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Speaker 2: on the terminal, I search in, I go generic thirty

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Speaker 2: year and upcomes the inflation adjusted thirty year bond essentially,

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Speaker 2: And of course it was two percent. It went down

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Speaker 2: under zero percent during COVID and Ian, as you point out,

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Speaker 2: it's moonshotted back to new hives. What is the significance

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Speaker 2: of a new high two point nine percent real thirty

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Speaker 2: year yield.

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Speaker 6: I think it's a clear indication that there are a

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Speaker 6: lot of reasons to be nervous about whether it is

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Speaker 6: I hire our star making a local policy bond.

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Speaker 2: Then why not get it started today and shock people

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Speaker 2: when they're not expecting it.

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Speaker 6: Actually, if he were to go, let's say, imagine he

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Speaker 6: went fifty or the committee went fiftyfty or seventy five,

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Speaker 6: what happens to the equity market? Pretty sharp decline presumables

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Speaker 6: that would tighten financial conditions or make them less easy.

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Speaker 6: That would take some of the edge off of inflation.

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Speaker 6: But the issue then becomes what would the market price in?

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Speaker 6: Would we see seventy five but instead price in another

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Speaker 6: one hundred and fifty or two hundred most likely?

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Speaker 4: What kind of statement? What kind of press conference are

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Speaker 4: you expecting here today?

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Speaker 6: That's a bigger wild card than has been the past.

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Speaker 6: What we saw last press conference by worsh was a

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Speaker 6: lot of conversation about things that could happen, and not

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Speaker 6: a lot of conversation about what will happen in the

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Speaker 6: near term. And that's the pulling back from forward guidance.

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Speaker 6: I do think that it will I think will be

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Speaker 6: a lively press conference, but I don't think that we'll

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Speaker 6: have any great insight as it takes.

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Speaker 4: Does does he have to do a press conference? Can

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Speaker 4: he just say, hey, here's our statement, we're good. I mean,

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Speaker 4: you hear from our fed people all the time. Does

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Speaker 4: he have to do a press conferen or has that

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Speaker 4: been kind of established the norms?

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Speaker 6: Well, it's certainly established as the norm. And by not

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Speaker 6: doing a press conference, that would be a clear message

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Speaker 6: to the market, and it would be a volatility enhancing

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Speaker 6: a message. You'd see a lot of choppy price action

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Speaker 6: around that.

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Speaker 2: People always want to know your ten year yield? Where

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Speaker 2: is your US full faith and credit yield twelve months

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Speaker 2: from now?

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Speaker 6: Twelve months from now, so July twenty twenty seven. I

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Speaker 6: think at this stage you're probably in the three seventy five.

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Speaker 2: Under four percent. Yes, you are trouble.

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Speaker 4: He is.

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Speaker 2: I mean the contra the combo of his under four

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Speaker 2: percent call on yield plus his availability of Montreal Canadian

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Speaker 2: tickets at the bank. It's just it's just it's a

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Speaker 2: double barrel brilliance fidling, and thank you so much. Female

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Speaker 2: capital markets. Stay with us. More from Bloomberg Surveillance coming

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Speaker 2: up after this.

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Speaker 1: You're listening to the bloom Surveillance podcast. Catch US Live

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00:20:02,280 --> 00:20:05,479
Speaker 1: weekday afternoons from seven to ten am Eastern. Listen on

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00:20:05,520 --> 00:20:09,199
Speaker 1: Applecarplay and Android Otto with the Bloomberg Business app, or

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00:20:09,359 --> 00:20:10,800
Speaker 1: watch US Live on YouTube.

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Speaker 2: So here's what's happening right now, y'all. Watch the World

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Speaker 2: Cup and the brand I mean, the child, the offspring

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Speaker 2: is trying out for soccer. Yeah, and they're like JV borderline.

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Speaker 2: Maybe they'll play varsity, but they're like, mom, dad, I

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Speaker 2: need the Adidas Predator Elite FT.

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Speaker 4: Absolutely, it's what.

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Speaker 2: You use when you control or you're striking.

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Speaker 4: Thirty forty dollars maybe how much two.

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Speaker 2: And eighty dollars for these? Joining us now and charge

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Speaker 2: your back to school spending. Julia Wilson, who's exquisite at KPMG,

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Speaker 2: on looking at the consumer and the trends, is back

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Speaker 2: to school spending still a thing.

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Speaker 7: Back to school is still a thing, and the headline

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00:20:51,560 --> 00:20:54,960
Speaker 7: number is a school spend is up six percent. But

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Speaker 7: the way that I think about is you really have

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Speaker 7: to unpack that, and the devil's in the detail. The

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Speaker 7: average says the consumer is going to be spending more.

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00:21:03,600 --> 00:21:06,080
Speaker 7: But if I look at ten consumers and how they're

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Speaker 7: thinking about it, you have basically four of those consumers

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Speaker 7: are going to spend more, four of those consumers are

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Speaker 7: going to spend about the same, and two of them

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00:21:14,480 --> 00:21:16,040
Speaker 7: are going to spend a little bit less, and that

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00:21:16,119 --> 00:21:19,200
Speaker 7: all nets out to about six percent. So it's really

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00:21:19,200 --> 00:21:23,320
Speaker 7: interesting to see that of those consumers there really is

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Speaker 7: a discrepancy across the mix.

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Speaker 4: We had an economist in here in your seat just

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Speaker 4: about an hour ago, was that they think the K

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Speaker 4: shaped economy is becoming less pronounced. Do you see that.

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Speaker 7: It's funny because I was thinking, we're doing back to

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Speaker 7: school and there's a lot of other letters in the

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00:21:40,040 --> 00:21:43,359
Speaker 7: alpha bet than K. I definitely think there is that

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00:21:43,600 --> 00:21:46,040
Speaker 7: you still see this. There's the has and the have nots,

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Speaker 7: and then there's kind of the steady of the ship,

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Speaker 7: which is a very large component right now of at

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Speaker 7: least back to school spin, because that's not even that's

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Speaker 7: not really discretionary, that's quasi utilitarian spin. But what I

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Speaker 7: really like to see is when I look at the

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Speaker 7: fringes of the day, So if I continue to unpack

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Speaker 7: those ten consumers, there's four that are spending more. What

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Speaker 7: are they really doing? Two of those consumers are making

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Speaker 7: trade off, so they're going to spend less going out

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Speaker 7: and dining out, and they're you know, doing things at home.

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Speaker 7: They might stop to do those vacations that they were

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Speaker 7: doing over the summer. There's one of those that are

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Speaker 7: making sometimes kind of like not sustainable choices, like dipping

438
00:22:21,960 --> 00:22:24,280
Speaker 7: into spending. But there's one and this is the one

439
00:22:24,280 --> 00:22:25,960
Speaker 7: that I kind of think they're taking my survey and

440
00:22:26,040 --> 00:22:28,040
Speaker 7: rolling their eyes a little bit of you know, I

441
00:22:28,080 --> 00:22:30,840
Speaker 7: don't need to change my behaviors to spend more on school.

442
00:22:30,880 --> 00:22:34,680
Speaker 7: So that's that's one in ten consumers saying that across tuition.

443
00:22:34,840 --> 00:22:37,480
Speaker 7: So when we ask tuition hikes, there's a question in

444
00:22:37,480 --> 00:22:40,119
Speaker 7: our survey about that, there's something about the soccer spend.

445
00:22:40,240 --> 00:22:41,440
Speaker 4: So it's no joke.

446
00:22:41,520 --> 00:22:44,280
Speaker 7: The three kits, the cleats, the shin guards, the kind

447
00:22:44,280 --> 00:22:49,200
Speaker 7: of training you know of the after school enrichment activities.

448
00:22:48,640 --> 00:22:53,360
Speaker 2: After THEO that's what athletics is called it. And it's

449
00:22:53,440 --> 00:22:54,440
Speaker 2: kind of half and half.

450
00:22:54,520 --> 00:22:56,320
Speaker 7: So we could either pay for two during or they're

451
00:22:56,359 --> 00:22:59,000
Speaker 7: probably doing both. Because it's a multi select question. But

452
00:22:59,359 --> 00:23:01,800
Speaker 7: you know, half of the parents that you know pay

453
00:23:01,880 --> 00:23:03,400
Speaker 7: for enrichment activities.

454
00:23:03,560 --> 00:23:08,399
Speaker 2: They're spending enrichment. We have a lot of thoughts. The

455
00:23:08,400 --> 00:23:11,800
Speaker 2: biggest scam on this is I'm going to go to

456
00:23:11,920 --> 00:23:14,680
Speaker 2: my school. We're going to a lacrosse camp at Disney

457
00:23:14,680 --> 00:23:18,600
Speaker 2: World for a week, and an enrichment activity week at

458
00:23:18,600 --> 00:23:21,480
Speaker 2: Disney World is three and a half days. You're paying

459
00:23:21,520 --> 00:23:24,640
Speaker 2: for the week, yep. But all they got the enrichment,

460
00:23:24,760 --> 00:23:26,840
Speaker 2: you know that, and they do it really well. I

461
00:23:26,880 --> 00:23:27,800
Speaker 2: have to say they do.

462
00:23:28,920 --> 00:23:32,840
Speaker 7: I have first hand knowledge of going to soccer tournaments.

463
00:23:33,320 --> 00:23:37,960
Speaker 4: So what does four five gas mean for good consumer? Really?

464
00:23:38,680 --> 00:23:39,400
Speaker 4: Right back there again?

465
00:23:39,480 --> 00:23:41,280
Speaker 7: Well, it's right back there in the average you know,

466
00:23:41,320 --> 00:23:42,720
Speaker 7: the last time that I was here, we were talking

467
00:23:42,720 --> 00:23:45,960
Speaker 7: about gas prices and they have spiked again. The amount

468
00:23:46,000 --> 00:23:48,600
Speaker 7: that the average consumer spends on gas is about what

469
00:23:48,640 --> 00:23:50,960
Speaker 7: we suggest in our survey that consumers are going to spend.

470
00:23:51,000 --> 00:23:55,359
Speaker 7: So for the consumers that are at the upper echelons

471
00:23:55,359 --> 00:23:57,879
Speaker 7: and brackets, it's not as much of the percentage of

472
00:23:57,920 --> 00:24:00,840
Speaker 7: the budget. But for those whose budge you know, is

473
00:24:00,960 --> 00:24:04,080
Speaker 7: only four or five thousand dollars a month, then that

474
00:24:04,200 --> 00:24:08,040
Speaker 7: really starts to hit. And that's where you see consumers

475
00:24:08,040 --> 00:24:10,280
Speaker 7: buying early. So Prime Day was earlier than it's been

476
00:24:10,320 --> 00:24:12,200
Speaker 7: in the past five years, and people are buying those

477
00:24:12,280 --> 00:24:15,880
Speaker 7: utilitarian products, like you know, you got the core school supplies,

478
00:24:15,920 --> 00:24:19,040
Speaker 7: but you also send stuff in that are personal care

479
00:24:19,040 --> 00:24:21,800
Speaker 7: and hygiene. You know, you've got one backpack full of notebooks,

480
00:24:21,800 --> 00:24:24,359
Speaker 7: but you have two sacks full of you know, Kleenex

481
00:24:24,359 --> 00:24:26,520
Speaker 7: and all those other kinds of things. Those things are

482
00:24:26,520 --> 00:24:30,000
Speaker 7: putting more stress on the bottom kind of the where

483
00:24:30,080 --> 00:24:30,879
Speaker 7: it's a high.

484
00:24:31,040 --> 00:24:31,880
Speaker 2: Is the most depressing.

485
00:24:32,880 --> 00:24:33,840
Speaker 4: The kids are growing.

486
00:24:34,000 --> 00:24:37,760
Speaker 2: Julia Wilson depressing us. She's principal for the Paychecks Empty

487
00:24:38,080 --> 00:24:42,160
Speaker 2: Consumer and Retail Strategy KPMG. Eight thirty in the morning

488
00:24:42,240 --> 00:24:44,359
Speaker 2: and in four hours I think it's a FED meeting,

489
00:24:44,680 --> 00:24:47,320
Speaker 2: maybe five hours will call. That features a negative five

490
00:24:47,400 --> 00:24:50,600
Speaker 2: year and the president's comments on the attack last sight,

491
00:24:50,680 --> 00:24:53,880
Speaker 2: and Jordan's certainly weighing on the market. Brent crude over

492
00:24:54,000 --> 00:24:57,400
Speaker 2: ninety dollars a barrel. Paul Sweening with Julia Wilson.

493
00:24:57,560 --> 00:25:02,119
Speaker 4: So, Julia, good news is I mean, the inflations out there,

494
00:25:02,320 --> 00:25:05,400
Speaker 4: it's a it's an issue, but the consumer's got a job.

495
00:25:05,520 --> 00:25:08,119
Speaker 4: I mean that's the Yeah, probably the biggest part of

496
00:25:08,359 --> 00:25:11,000
Speaker 4: just I would think retail sales is when we yeah,

497
00:25:11,000 --> 00:25:11,800
Speaker 4: it takes sales.

498
00:25:11,720 --> 00:25:14,520
Speaker 7: More than one exogenous shock to really bring the US

499
00:25:14,640 --> 00:25:17,440
Speaker 7: consumer down. So you know, they're continuing to spend. There's

500
00:25:17,480 --> 00:25:20,080
Speaker 7: nothing that's really taken a huge swath of the US

501
00:25:20,200 --> 00:25:22,679
Speaker 7: consumers and taken away the paycheck, and that's where you

502
00:25:22,720 --> 00:25:25,320
Speaker 7: see the retreats that we did when we had COVID,

503
00:25:25,680 --> 00:25:27,919
Speaker 7: when we have any of the other major recessions. So

504
00:25:27,960 --> 00:25:31,680
Speaker 7: they're continuing to spend, and they're spending begrudgingly. But we're

505
00:25:31,680 --> 00:25:35,560
Speaker 7: seeing really strong earnings coming out from those four consumer companies,

506
00:25:35,560 --> 00:25:37,840
Speaker 7: and I think it's a result of the resilience of

507
00:25:37,880 --> 00:25:38,320
Speaker 7: the consumer.

508
00:25:38,400 --> 00:25:41,080
Speaker 2: What do you see in uses of charge cards or

509
00:25:41,119 --> 00:25:43,720
Speaker 2: what's it called pay as you go? Yeah, we as

510
00:25:43,760 --> 00:25:46,720
Speaker 2: the dynamic there the kpmgc's.

511
00:25:46,000 --> 00:25:47,760
Speaker 7: Yeah, so that that is you know, when you're talking

512
00:25:47,760 --> 00:25:50,560
Speaker 7: about the consumer spending more, there's places that they can

513
00:25:50,600 --> 00:25:52,679
Speaker 7: cut back and you do see that when we have

514
00:25:52,960 --> 00:25:54,880
Speaker 7: one of our key graps that I love to look

515
00:25:54,920 --> 00:25:58,600
Speaker 7: at is taking everything that's you know, essentials, you know,

516
00:25:58,680 --> 00:26:01,639
Speaker 7: your house and your car and your groceries on one end,

517
00:26:01,680 --> 00:26:03,800
Speaker 7: and things that are really non essential and the things

518
00:26:03,840 --> 00:26:06,800
Speaker 7: that are dipping. The biggest or the large purchases travel

519
00:26:07,560 --> 00:26:10,680
Speaker 7: the toys and electronics, although those things are kind of low.

520
00:26:10,840 --> 00:26:12,760
Speaker 7: But the middle of the pack, you know, they're still

521
00:26:12,800 --> 00:26:15,920
Speaker 7: spending on apparel and footwear and some of the things

522
00:26:15,960 --> 00:26:18,000
Speaker 7: that you know, you can really do I need it

523
00:26:18,000 --> 00:26:19,440
Speaker 7: this month or do I need it next month? So

524
00:26:19,680 --> 00:26:22,480
Speaker 7: they are spending, and there are some of the consumers

525
00:26:22,480 --> 00:26:24,880
Speaker 7: that are dipping into savings or putting it on credit cards.

526
00:26:24,880 --> 00:26:27,119
Speaker 7: So you do see those two things slipping up. And

527
00:26:27,160 --> 00:26:29,000
Speaker 7: that's where we start to say there's a little bit

528
00:26:29,040 --> 00:26:32,840
Speaker 7: more softness in the consumer kind of increasingly going that direction.

529
00:26:33,000 --> 00:26:35,520
Speaker 4: And the consumers go into the store, they're not just

530
00:26:35,640 --> 00:26:38,359
Speaker 4: clicking right. There's I mean, for a while that we

531
00:26:38,400 --> 00:26:40,560
Speaker 4: thought there would be no more department stores out there

532
00:26:40,560 --> 00:26:42,320
Speaker 4: and the malls will be dead. But that's not all. Read.

533
00:26:42,640 --> 00:26:44,320
Speaker 7: The nineties are back in a lot of ways. So

534
00:26:45,240 --> 00:26:47,600
Speaker 7: the you know, if you look at generationally, the ones

535
00:26:47,640 --> 00:26:49,800
Speaker 7: that are most time strapped are your millennials and your

536
00:26:49,840 --> 00:26:52,360
Speaker 7: your gen x's, and they're the ones that are using

537
00:26:52,760 --> 00:26:55,840
Speaker 7: and they have a little bit more on average, they

538
00:26:55,880 --> 00:26:58,080
Speaker 7: have more money to spend on higher prices. But the

539
00:26:58,119 --> 00:27:00,320
Speaker 7: youngest generations, and you have to think about the the

540
00:27:00,400 --> 00:27:03,119
Speaker 7: gen alphas are. Really there's a blended back to school.

541
00:27:03,400 --> 00:27:05,320
Speaker 7: They're the ones that are going off to college. They're

542
00:27:05,400 --> 00:27:08,680
Speaker 7: they're they're the ones that were born. Really it's really

543
00:27:08,720 --> 00:27:11,040
Speaker 7: scary to say how what years.

544
00:27:11,000 --> 00:27:12,360
Speaker 2: You're talking about.

545
00:27:13,800 --> 00:27:17,520
Speaker 7: As gen alphas have things that you know, they have

546
00:27:17,680 --> 00:27:21,240
Speaker 7: their own credit card or spending money and so you

547
00:27:21,280 --> 00:27:24,639
Speaker 7: know there's definitely ways that they can either have their

548
00:27:24,680 --> 00:27:27,479
Speaker 7: own credit card or there's you know, different products that

549
00:27:27,680 --> 00:27:29,000
Speaker 7: you know a parent can control.

550
00:27:31,160 --> 00:27:32,800
Speaker 6: Yes, they you.

551
00:27:32,720 --> 00:27:36,280
Speaker 7: Know those those kids that are those kids are stupid?

552
00:27:36,560 --> 00:27:40,240
Speaker 2: Are you using? They are spending money at hydrate their

553
00:27:40,240 --> 00:27:42,320
Speaker 2: face after soccer practice they do.

554
00:27:42,400 --> 00:27:44,399
Speaker 7: Hydration is important. It's in one of those areas that

555
00:27:44,440 --> 00:27:46,640
Speaker 7: it goes in your body or on your skin. And

556
00:27:46,640 --> 00:27:49,879
Speaker 7: and sunscreen is is definitely the sun stays out longer,

557
00:27:49,960 --> 00:27:53,120
Speaker 7: so so those sun products are continuing to to elevate

558
00:27:53,840 --> 00:27:54,840
Speaker 7: our specialty beauty.

559
00:27:55,560 --> 00:27:58,400
Speaker 2: This is just Julie, It's like, this is the most depressed.

560
00:27:58,119 --> 00:28:00,200
Speaker 4: I can see my charge for my son into Ok.

561
00:28:00,240 --> 00:28:01,800
Speaker 4: You I see where it eachs every day.

562
00:28:01,960 --> 00:28:04,480
Speaker 2: You know what the fundamental thing is Room board intuition

563
00:28:04,560 --> 00:28:06,680
Speaker 2: out of State at William and Mary is seventy one

564
00:28:06,720 --> 00:28:10,720
Speaker 2: thousand bucks a year, and that's and that's a bargain

565
00:28:11,000 --> 00:28:13,360
Speaker 2: compared to one hundred thousand at some of these schools.

566
00:28:13,359 --> 00:28:17,080
Speaker 4: The oldest football rivalry in the South Wayman Mary and

567
00:28:17,200 --> 00:28:18,920
Speaker 4: University rich And I've never been there.

568
00:28:19,040 --> 00:28:22,399
Speaker 2: Yeah, I feel lesser that I had not been to William.

569
00:28:23,000 --> 00:28:25,560
Speaker 7: It's the two hundred and fiftieth anniversary, so Wayman Mary.

570
00:28:25,880 --> 00:28:26,240
Speaker 4: Was that right?

571
00:28:26,480 --> 00:28:30,639
Speaker 7: Yeah, well so we were the second oldest university.

572
00:28:30,800 --> 00:28:33,240
Speaker 2: Julia, thank you brilliant Julia Wilson, KPMG.

573
00:28:33,720 --> 00:28:38,560
Speaker 1: This is the Bloomberg Surveillance podcast, available on Apple, Spotify,

574
00:28:38,680 --> 00:28:42,960
Speaker 1: and anywhere else you get your podcasts. Listen live each weekday,

575
00:28:43,080 --> 00:28:46,560
Speaker 1: seven to ten am Eastern on Bloomberg dot com, the

576
00:28:46,640 --> 00:28:50,680
Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You

577
00:28:50,680 --> 00:28:54,080
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578
00:28:54,240 --> 00:28:56,000
Speaker 1: always on the Bloomberg terminal.

579
00:29:00,080 --> 00:29:01,600
Speaker 7: I don't know how to sid