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Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside

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Speaker 1: my co host Matt Miller.

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Speaker 2: Every business day, we bring you interviews from CEOs, market pros,

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Speaker 2: and Bloomberg experts, along with essential market moving news.

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Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever

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Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.

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Speaker 1: All right, so we had the CPI print today pretty

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Speaker 1: much I think what most people were looking for. Certainly consensus,

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Speaker 1: certainly gives some more credence to the argument that the

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Speaker 1: Fed can pause if it wants to. Let's check in

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Speaker 1: with somebody who pays close attention to this stuff, Ira Jersey,

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Speaker 1: chief US interest rate strategist for Bloomberg Intelligence. So, Ira,

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Speaker 1: what's your takeaway from the inflation print we saw today?

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Speaker 3: Yeah, obviously, you've know, you guys have talked about it

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Speaker 3: at nauseum here a little bit. Pretty much as expected.

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Speaker 3: It doesn't really leave a whole lot of doubt as

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Speaker 3: to what's going to happen tomorrow. I think that, you know,

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Speaker 3: if we had seen something where you get a point

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Speaker 3: five or a point six print on uh on on

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Speaker 3: the core numbers, then maybe the Fed would would hike tomorrow,

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Speaker 3: but they've signaled that they're probably going to skip tomorrow's meeting.

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Speaker 3: I think the bigger the bigger thing that today's data

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Speaker 3: does for us is really leaves in doubt what then

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Speaker 3: is going to happen in July, so that you know,

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Speaker 3: the market was pricing for a near certainty that they

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Speaker 3: were going to skip June and then hike in July.

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Speaker 3: But now you know, I think that we have to

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Speaker 3: reassess that uh, that the certainty that the Fed is

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Speaker 3: going to go in UH in July, and the market

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Speaker 3: started to kind of move away at least a little

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Speaker 3: bit from that possibility at this point.

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Speaker 4: So irauld talk to us about when we're looking at

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Speaker 4: this speculation that's happening in the bond market and how

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Speaker 4: it's at a record when you are looking at treasury

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Speaker 4: features ahead of the FED meeting, break it down as

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Speaker 4: far as what is happening with the positioning there.

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Speaker 3: Yeah, there's a lot of so so there's record short

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Speaker 3: positioning by speculators and UH in the treasury market basically

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Speaker 3: everyone short duration. So the so the fact that you

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Speaker 3: actually have a little bit of a selloff going on

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Speaker 3: right here right now is a little bit surprising, But

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Speaker 3: typically what happens is that you know, this positioning data

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Speaker 3: doesn't necessarily give you a lot of information about what

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Speaker 3: direction the market's going to go. You know that the

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Speaker 3: fact that people are very short just means in particular

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Speaker 3: that as the market sells off that you could see

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Speaker 3: some short covering, and that it just gets harder and

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Speaker 3: harder for moves in the direction that the future's positioning is.

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Speaker 3: But we have to keep in mind too that that

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Speaker 3: these some of this positioning in a way could be

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Speaker 3: a hedge to another risk that some of these levered

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Speaker 3: investors that that are primarily short have on. So for example,

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Speaker 3: if their long corporate bonds, for example, they could be

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Speaker 3: short some treasuries as and and treasury futures as kind

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Speaker 3: of a hedge to that. Or could be that they're

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Speaker 3: short equities or long equities rather and you know short

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Speaker 3: rates as well. You know that that's possible too. So

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Speaker 3: so it's a little bit hard to discern with this

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Speaker 3: future's positioning exactly what's going on with the overall strength

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Speaker 3: of the market. But I do think that it means

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Speaker 3: it's going to get harder and harder to for the

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Speaker 3: market to sell off on as dramatically as it has,

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Speaker 3: and you could wind up seeing on a rally, You

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Speaker 3: could wind up seeing massive rallies because a lot of

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Speaker 3: these shorts could get covered very quickly.

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Speaker 1: Shorting US treasures isn't that kind of un American? How

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Speaker 1: often does that happen? I mean, what who does that?

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Speaker 3: There's been been a lot of people short treasuries, you know,

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Speaker 3: for the better part of you know, two years now, really,

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Speaker 3: you know, just and you know part of part of

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Speaker 3: the reason is that when interest rates are going up,

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Speaker 3: you don't want to be long, right, and you know,

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Speaker 3: there's there's ways to make money. And if you look

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Speaker 3: at that, even though you know, the Bloomberg Treasury Index

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Speaker 3: has been had record losses over the last eighteen months,

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Speaker 3: even worse than nineteen seventies and eighties, even though interest

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Speaker 3: rates have went up way more back then, right back

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Speaker 3: during the you know, nineteen seventy eight to nineteen eighty one,

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Speaker 3: you actually had interest rates go up ten percent, right,

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Speaker 3: and we've only seen interest rates go up you know,

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Speaker 3: four and a half five percent now here. But there's

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Speaker 3: some bond math involved, because the relationship between the price

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Speaker 3: of a bond and the yield and yield moves is

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Speaker 3: much much higher now, so you get a little move

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Speaker 3: in in a yield of a bond, and it's more

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Speaker 3: in dollar price today than it was back in the

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Speaker 3: nineteen nineteen seventies and eighties. So even though we've had

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Speaker 3: these massive losses, a lot of people have outperformed. So

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Speaker 3: when you look at active managers in bond funds, both

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Speaker 3: bond mutual funds and actively managed ETFs, you actually see

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Speaker 3: significant outperformance compared to disease. Even though you now have

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Speaker 3: some people you know, still moving to passive. Within the

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Speaker 3: ETF world, the active managers have have done very well

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Speaker 3: by being short treasuries or underweight treasury securities in their portfolios.

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Speaker 4: Hey, Ira, I've had some traders talk to me about

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Speaker 4: how whenever they're shorting treasuries, especially if you're looking at

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Speaker 4: the tenure, it was more of the expectations that yield

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Speaker 4: to move higher, but then the caveat being so extreme

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Speaker 4: position may have the counter effect and then end up

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Speaker 4: having to push yield lower. Do you think that's plausible?

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Speaker 3: Well, I think it has more to do with the

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Speaker 3: volatility and in the directionality of the market. So, like

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Speaker 3: I mentioned, if if people weren't as short as they

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Speaker 3: are now with things like treasury futures, we might have

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Speaker 3: seen even even a bigger sell off today than we've

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Speaker 3: seen so far. You know, ten years yields, you know,

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Speaker 3: higher by five ish basis points on the day. But

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Speaker 3: I think it's when you go the other way and

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Speaker 3: you get that short covering that you wind up really

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Speaker 3: seeing like position squaring and uh and and you know

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Speaker 3: what would be you think would be a five base

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Speaker 3: point move can turn into a ten or twelve basis

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Speaker 3: point move in a hurry. And we've seen quite a

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Speaker 3: lot of that over the over the last couple of years,

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Speaker 3: where you get this these extreme positioning and then you

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Speaker 3: get this massive snapbacks as as the market kind of

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Speaker 3: recalibrates their their thinking and and you know, again like

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Speaker 3: if if you know, I think a big part of

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Speaker 3: the reason why you see some of the short base

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Speaker 3: and in things like duration is I do suspect that

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Speaker 3: there's a lot of people who are in interest rates steepeners.

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Speaker 5: Now.

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Speaker 3: People were in flattening trades for a very long time

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Speaker 3: where they were long say ten years or thirty year

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Speaker 3: securities and then they were short twos and fives. I

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Speaker 3: think I think that's starting to flip as we get

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Speaker 3: toward the end of the fed's hiking cycle, because the

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Speaker 3: next move, and I do concur with this, the next

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Speaker 3: move is likely to be a very significant steepening of

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Speaker 3: the yield or un inversion of the yield curve at least,

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Speaker 3: so you wind up with an environment where people are

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Speaker 3: going to be buying two year, three year, five year

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Speaker 3: notes and then want to be short or or underweight

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Speaker 3: ten year and thirty year securities.

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Speaker 1: Hira, what would surprise you tomorrow from FED Chairman jpal

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Speaker 1: As comments, I.

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Speaker 3: Think if he's I think if he's extremely hawkish, would

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Speaker 3: would surprise me, you know, given some of the some

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Speaker 3: of the data that we've received. Yes, the employment data

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Speaker 3: was pretty solid, but a lot of the other data

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Speaker 3: that we've seen everywhere, from some sales data as well

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Speaker 3: as some of the ism surveys and the leading economic

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Speaker 3: indicator something all been pretty poor and actually are very

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Speaker 3: close to recessionary type levels. So so so I think

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Speaker 3: if he was very hawkish tomorrow, that would be a surprise,

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Speaker 3: certainly if he was more hawkish than he was last month.

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Speaker 3: So I'm looking very closely at our at at at

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Speaker 3: our FED sentiment indicator. So after he after J. Powell

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Speaker 3: gives his opening remarks from the press conference, you know

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Speaker 3: we're going to run our natural language processing model and yeah,

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Speaker 3: you know take a.

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Speaker 1: Look as known as your juniors, Well.

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Speaker 3: Our data science team will.

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Speaker 1: Yeah, I know we've got one of those MBA.

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Speaker 4: How much fun was it to see Ira last week

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Speaker 4: and the suspenders with the soccer all over?

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Speaker 6: Great?

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Speaker 1: He comes out of his cam every once in a while,

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Speaker 1: so we would be appreciate that, Ira Jersey, thanks so much.

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Speaker 1: I he covers all the interest rate strategy work for

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Speaker 1: Bloomberg Intelligence. I got a whole team, uh doing that

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Speaker 1: kind of stuff, and they've got some serious models. He's

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Speaker 1: got a model that kind of covers on a day

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Speaker 1: to day basis the receipts and the spending of the

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Speaker 1: US government. Amazing, Like I don't even have that for myself.

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Speaker 1: He's got it for the entire US government. So we

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Speaker 1: knows when and if the US can afford to pay

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Speaker 1: their bill. So keep an eye on that.

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Speaker 5: You're listening to the team Ken's are Live program Bloomberg

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Speaker 5: Markets weekdays at ten am Eastern.

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Speaker 7: On Bloomberg dot com, the iHeartRadio.

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Speaker 5: App and the Bloomberg Business app or listen on demand

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Speaker 5: wherever you get your podcasts.

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Speaker 1: Jess Matt and Paul Sweeney Here in the Bloomberg Interactive

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Speaker 1: Brokers studio, Boy attention is going to be this afternoon

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Speaker 1: down in Miami, Florida, where President Trump will be arranged. Yeah,

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Speaker 1: we want to get the kind of a roundtable this

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Speaker 1: discussion here and kind of catch it from a couple

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Speaker 1: of different angles. So we welcome Wendy Schuler Brown University professor.

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Speaker 1: She joins us here, as does Kaylee Lines. She joins us.

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Speaker 1: She is in Miami at the courthouse. Of course, she

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Speaker 1: covers the White House for Bloomberg Television. We appreciate her

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Speaker 1: time on a busy, busy day. Wendy, let's start with you.

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Speaker 1: I mean, it doesn't happen every day that former president

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Speaker 1: gets arraigned on federal charges.

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Speaker 6: Here.

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Speaker 1: Do you expect this to mean for President Trump and

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Speaker 1: potentially another run for the presidency?

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Speaker 8: Well, good morning. In the short term, it's it's good

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Speaker 8: for Donald Trump with his base and donations. They expect

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Speaker 8: they're holding a fundraiser, I believe, even this evening, and

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Speaker 8: they expect to raise a lot of money off this

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Speaker 8: and really continue to keep his name in the news.

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Speaker 8: I mean, there is no publicity that Donald Trump doesn't like,

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Speaker 8: and so I think in the short run, you know,

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Speaker 8: he'll benefit in some way from this, But in the

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Speaker 8: longer run, it's just another or an additional liability to

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Speaker 8: his candidacy, particularly the broader Republican Party, and I don't

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Speaker 8: see where it does him any favors with the key

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Speaker 8: independent voters he'd need to win the general. But even

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Speaker 8: in state primaries across the country, you can register and

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Speaker 8: change your party registration from independent to Republican. So the

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Speaker 8: independents wanted to shape the Republican nomination process. They can

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Speaker 8: do that and haven't been big fans of the president

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Speaker 8: in recent the former president in recent elections. So that's

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Speaker 8: it's a liability. I think that's sort of deep and

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Speaker 8: persistent for Donald Trump's longer term prospects.

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Speaker 4: Kaylee, I want to bring you into this conversation set

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Speaker 4: the scene for us. What are things shaping up heading

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Speaker 4: into this afternoon.

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Speaker 9: Well, I'm at the outside the courthouse right now, and

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Speaker 9: there are dozens and dozens of media tents like the

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Speaker 9: one I am in for Bluebert. There is a very

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Speaker 9: high police presence, but there isn't yet at this point.

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Speaker 9: It seems to be a lot of protesters, but they

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Speaker 9: are prepared for potentially a lot to be here over

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Speaker 9: the course of today. The Miami Police Chief is that

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Speaker 9: it could be anywhere between five thousand and fifty thousand

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Speaker 9: supporters of President Trump who show out today, as he

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Speaker 9: had calls on them to do. He of course had

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Speaker 9: posted on true social over the weekend, I'll see you

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Speaker 9: in Miami on Tuesday. He had in an interview with

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Speaker 9: Roger Stone on radio over the weekend as well, so

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Speaker 9: that people need to come out and keep fully protest.

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Speaker 9: So we'll be on watch for that. And of course

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Speaker 9: it's at three pm Eastern time, so about four and

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Speaker 9: a half hours from now. I think, if my math

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Speaker 9: is right, that the President will be showing up here,

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Speaker 9: although we may not see him. He may enter under

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Speaker 9: grown to be arraigned on these federal charges.

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Speaker 1: What, Wendy, what do you make of some of the

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Speaker 1: I guess responses we've had from members of Congress. Some

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Speaker 1: have come out and supporting the president pretty wholeheartedly, and

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Speaker 1: some have not supported him. Some have been, like cenatored Romney,

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Speaker 1: been critical here. How do you expect this to play out.

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Speaker 8: Well, they're sort of dancing around it, right, They wanted

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Speaker 8: to can't alienate the Trump base, either whether you're currently

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Speaker 8: holding office and running or president you're just currently holding

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Speaker 8: office trying to get reelected, if you're a House member

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Speaker 8: in particular in twenty four, you're dancing around it. On

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Speaker 8: the other hand, you see that they're sort of trying

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Speaker 8: not to talk about the severity of the classification level

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Speaker 8: of the documents that were badly handled. So these are

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Speaker 8: really highly sensitive national security documents, and it gets to

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Speaker 8: the point of do you want this man in charge

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Speaker 8: of our national security? And then it's a legitimate point

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Speaker 8: and question to ask. People will get confused about the

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Speaker 8: number of indictments and the scope of authority, but at

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Speaker 8: the end of the day, he's got, you know, military

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Speaker 8: plans and nuclear secrets lying around the ballroom. You know,

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Speaker 8: that does not say I'm going to be responsible with

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Speaker 8: national security. And the Republicans want to keep the edge

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Speaker 8: that they think they have on national security. So there

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Speaker 8: does come a point, except for maybe through Jim Jordan

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Speaker 8: of Ohio, where you say, I can't really defend compromising

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Speaker 8: our national security from my own re election prospects.

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Speaker 4: Kayleie, how has the Biden administration responded so far?

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Speaker 9: Well, they really haven't at all. The President has really

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Speaker 9: tried to keep him his distance from this. When he's

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Speaker 9: been asked about that, he has set no comment on

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Speaker 9: the indictment because, of course, one of the narratives that

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Speaker 9: President former President Trump as well as Republicans have been

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Speaker 9: pushing is that this is politically motivated, that this is

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Speaker 9: a weaponization of the Justice Department. President Trump has said

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Speaker 9: that this is a corrupt Biden administration election interference at

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Speaker 9: the highest level. So to this point, President Biden has

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Speaker 9: tried to stay far away from this, let the Justice

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Speaker 9: Department do its work, and not really try to be

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Speaker 9: involved in this.

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Speaker 1: In any way, Kaylee Done in Miami, is there an

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Speaker 1: expectation that the president will be public here? Will there

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Speaker 1: be a public I'm not going to say a purp walk,

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Speaker 1: but will there be some public appearance by the president today?

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Speaker 1: Is part of this process? Do we know?

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Speaker 9: It really could go either way. The expectation though, is

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Speaker 9: that he will not be walking through the usual lobby

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Speaker 9: of this courthouse, that he's going to enter be an

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Speaker 9: underground garage and then head into the courthouse, so we

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Speaker 9: may not actually see him here physically. Where we will

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Speaker 9: see the president is after he finishes these proceedings in

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Speaker 9: Miami today. He's going to get back on his private plane,

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Speaker 9: fly from Miami back up to Bedminster in New Jersey,

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Speaker 9: and speak at his golf club there this evening at

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Speaker 9: eight fifteen pm Eastern time, and bold a donor event

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Speaker 9: as Wendy talks about his campaign is hoping celebrates two

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Speaker 9: million dollars at that event tonight, just hours after he

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Speaker 9: made history by being arraigned on federal criminal charges. This

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Speaker 9: is something we have never seen happen before, but it

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Speaker 9: could have the same effect as the indictments previously in

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Speaker 9: Manhattan earlier this year, that what it really accomplishes is

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Speaker 9: galvanizing his base and ultimately being away for him to thundering.

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Speaker 4: Wendy, what's the timetable here that we're talking about when

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Speaker 4: it comes to a potential indictment obviously like this, As

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Speaker 4: far as how long this could drag out for.

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Speaker 8: Well, that's a great question just because it gets to

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Speaker 8: the judge, right, this is the judge that appointed a

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Speaker 8: special master, you know, to sort of go over what

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Speaker 8: the Justice barman had done. In terms of the raid

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Speaker 8: the documents. You know, this judge got chastised for the

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Speaker 8: way she handled this case before by her you know,

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Speaker 8: sort of higher level judges on a panel. The question is,

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Speaker 8: you know, does she go buy the book here or

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Speaker 8: does she compromise the case in some way and does

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Speaker 8: she have to be removed from the case. I mean,

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Speaker 8: there's still a question mark about whether she actually ends

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Speaker 8: up being the presiding judge. You know, you've got setting

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Speaker 8: trial dates, you've got jury selection. You you know, these

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Speaker 8: trials and I mean multiple trials to the former president

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Speaker 8: will go, we'll move on, and you know they'll take

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Speaker 8: a long time. They'll drag out, which was good good

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Speaker 8: for Trump in terms of his ability. As Kelly's you know,

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Speaker 8: absolutely rightly suggesting, but there's a weariness, particularly among core voters,

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Speaker 8: and as I said, mechanically in the primaries next year,

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Speaker 8: you can have a lot of people who aren't core

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Speaker 8: Trump's supporters actually sign up to vote in the Republican primary.

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Speaker 8: Since Biden, if he's the nominee, you know, as he

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Speaker 8: stays healthy and all that stuff that we talk about,

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Speaker 8: there's not gonna be much of a contest on the

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Speaker 8: Democratic side. So You're going to see some shifting of

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Speaker 8: voters in that primary and this, I think this will

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Speaker 8: become a liability, particularly if he gets a lot of

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Speaker 8: really rowdy, slash violent people to protest this. That just

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Speaker 8: reminds people of January sixth, and I don't think that

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Speaker 8: does anybody good on the Republican side.

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Speaker 1: Wendy, If I'm running for the Republican nomination, how do

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Speaker 1: I play this thing that Trump has been in ditona

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Speaker 1: of federal crimes?

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Speaker 8: You know, you play it by basically trying and especially

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Speaker 8: in digital advertising on social media platforms, to saying, look,

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Speaker 8: I support everything this guy you know did, I'm loyal,

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Speaker 8: but he's not the guy anymore. It's too chaotic, it's

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Speaker 8: too disruptive, you can't usin with national security. Try to

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Speaker 8: get that one in and just really, if they can

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Speaker 8: get the kind of big money, you know, blanket the

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Speaker 8: Republican party base in the next couple of months saying

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Speaker 8: I am really the better alternative and try to sort

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Speaker 8: of erode that thirty four to thirty five percent base

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Speaker 8: that we think he has in the Republican primary voting

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Speaker 8: electorate and steal nine to fifteen percent of that voting

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Speaker 8: populist elsewhere, and I think that needs to be The

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Speaker 8: strategy is the slow and steady, but it needs to

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Speaker 8: happen now, and it needs to say, you know, I'm

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Speaker 8: the better alternative. You can still like this guy, but

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Speaker 8: vote for me if you really want to win in

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Speaker 8: twenty twenty four.

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Speaker 4: Hey, kayleie, we only have about a minute left. How

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Speaker 4: does this impact other potential cases that Trump is having

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Speaker 4: to deal with as well?

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Speaker 9: Well, that's a really good question, because of course this

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Speaker 9: isn't the first time that he has been arranged or

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Speaker 9: case criminal charges that already happened in New York. But

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Speaker 9: this also may not be the only indictment we see

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Speaker 9: stemming from investigations by Special Counsel Jacksmith. He is also

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Speaker 9: investigating Trump's role in January sixth. There is a district

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Speaker 9: attorney in County Georgia that is also looking at his

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Speaker 9: attempts to overturn the results of the twenty twenty election.

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Speaker 9: So this doesn't necessarily mean the end of Trump's legal woes,

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Speaker 9: and potentially related to January sixth, we could actually see

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Speaker 9: even more serious charges than the one he's facing here.

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Speaker 9: And I have to apologize if you hear this rooster.

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Speaker 4: Guys.

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Speaker 9: I know you've been talking about there are literally wild

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Speaker 9: chickens and roosters walking around the courthouse right now.

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Speaker 1: All right, we'll leave that to you. You're in charge

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Speaker 1: of that down there. Bloomberg TD anchor Kaylee Lines definitely

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Speaker 1: on location down in Miami with the chickens in the

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Speaker 1: Hends and Wendy Schiller Brown University, a professor joining us

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Speaker 1: to get some just some smart analysis of how this

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Speaker 1: is all going to play out down in Miami today

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Speaker 1: and what it might mean for President former President Trump

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Speaker 1: gung Ford, particularly as we prepare for the twenty twenty

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Speaker 1: four election. A lot of moving pieces there.

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Speaker 5: You're listening to the tape Cancher Live program Bloomberg Markets

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Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, Tune in up,

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Speaker 5: Bloomberg dot Com and the Bloomberg Business App. You can

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Speaker 5: also listen live on Amazon Alexa from our flagship New

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Speaker 5: York station, Just Say Alexa playing Bloomberg eleven thirty.

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Speaker 1: Bes min and Paul Swaite here in the Bloomberg Interactive

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Speaker 1: Broker Studio. Our Inflation Day, Today's CPI Day Today. Here's

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Speaker 1: a kind of the headline stuff on an annualized basis CPI.

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Speaker 1: The headline print four percent. That's kind of right in

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Speaker 1: line with a four point one percent expectation, but it's

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Speaker 1: down big from last month when it was four point

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Speaker 1: nine percent.

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Speaker 4: Eight was talking about those egg prices and the index

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Speaker 4: for eggs falling close to fourteen percent, the largest decrease

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Speaker 4: in that index since January nineteenth, big one of that

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Speaker 4: CPI report.

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Speaker 1: Yeah, I'm a big expedited guy. So that's that's chickens

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Speaker 1: outside the courthouse. Chickens outside of the court house with

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Speaker 1: Kaylee Lines, she's in charge.

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Speaker 10: All right.

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Speaker 1: Let's so they seem pretty good to me. But let's

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Speaker 1: go to somebody who does this stuff for a living.

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Speaker 1: Jeffrey Cleveland. He's a director and chief e commerce that

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Speaker 1: paid it in regal So, Jeff, you know, the print

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Speaker 1: seemed good to me. What's your takeaway from our inflation

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Speaker 1: out local here in the United States?

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Speaker 11: Well, I'm self interested. So when I look at the

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Speaker 11: index for food away from home, it's up eight point

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Speaker 11: three percent in the last twelve months.

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Speaker 1: Okay, so that's you.

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Speaker 11: Know, dining now, that's it's too much for me. Food

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Speaker 11: at home is up six percent year on year and

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Speaker 11: I think if I remember correctly, I flipped through the

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Speaker 11: report for the LA area, So the La Metro area

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Speaker 11: headline CPI was up point seven percent month to month.

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Speaker 11: So I'm not seeing this slow down in prices that

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Speaker 11: everyone is so cheerful.

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Speaker 1: Well, your problem out there, Jeff's gasoline price is what

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Speaker 1: are you guys doing out there? I mean it's it's

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Speaker 1: all your taxes also.

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Speaker 4: Use vehicle prices picked up in the MADE data.

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Speaker 11: That's correct too. Yeah, I think people drive too much here, Paul.

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Speaker 11: That's that's the problem in Los Angeles. It's a that's

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Speaker 11: a driving culture. Taxes and regulations don't help. That's the

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Speaker 11: short version of the story.

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Speaker 1: All right, So what does this all mean for the FED?

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Speaker 1: They're in lockdown. MOAD done in DC today and tomorrow.

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Speaker 1: We'll hear from the FED chairman Jpal tomorrow afternoon. How

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Speaker 1: do you think he and you know, the FED board

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Speaker 1: in general, how are they going to view some of

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Speaker 1: this data?

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Speaker 11: Well, I think they've communicated pretty clearly that they would

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Speaker 11: like to pause so or at least maybe skip this meeting.

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Speaker 11: So I think that's the plan here. Does this report

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Speaker 11: give them cover to do so?

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Speaker 6: Yes?

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Speaker 11: You know, the headline inflation was softer, coming into point one,

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Speaker 11: lowest year on year reading in a few years. So

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Speaker 11: that that's fine. I think, though, when I look at

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Speaker 11: the guts of the report, all jokes aside about about

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Speaker 11: food away from home here, I look at that core

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Speaker 11: CPI number. It has been point four or point five

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Speaker 11: month to month four by mic count six I think,

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Speaker 11: six consecutive months now. So to me, that's important because

437
00:20:43,520 --> 00:20:46,000
Speaker 11: that that's giving you a sense of the underlying trend

438
00:20:46,359 --> 00:20:48,200
Speaker 11: when you when you filter through a lot of the noise,

439
00:20:48,920 --> 00:20:52,480
Speaker 11: and that shows no signs of really really slowing down.

440
00:20:53,160 --> 00:20:55,840
Speaker 11: I think if you're a policy maker, your hope is

441
00:20:55,880 --> 00:20:59,119
Speaker 11: that rents in the al in the shelter component slows

442
00:20:59,160 --> 00:21:02,080
Speaker 11: further as the year progresses. But at this point I

443
00:21:02,119 --> 00:21:06,120
Speaker 11: think that's more hope than anything. So I would yeah,

444
00:21:06,119 --> 00:21:08,520
Speaker 11: maybe they skip, but there there's still there's gonna be

445
00:21:08,520 --> 00:21:11,000
Speaker 11: some discomfort here. I think if we keep getting point

446
00:21:11,040 --> 00:21:14,080
Speaker 11: four percent core CPI ratings through the summer.

447
00:21:13,960 --> 00:21:17,160
Speaker 4: Would we look in the warp function in the terminal

448
00:21:17,200 --> 00:21:20,520
Speaker 4: world interest rate probability? Still to your point, Jeffrey, when

449
00:21:20,520 --> 00:21:23,359
Speaker 4: you're thinking about that July meeting, a potential skip, maybe

450
00:21:23,359 --> 00:21:26,720
Speaker 4: tomorrow but still sixty percent odds there that there will

451
00:21:26,760 --> 00:21:29,439
Speaker 4: be a hike next month. What do you think we

452
00:21:29,520 --> 00:21:32,520
Speaker 4: need to see happen in the data in particular between

453
00:21:32,560 --> 00:21:36,159
Speaker 4: now and then further to maybe continue this pause, or

454
00:21:36,200 --> 00:21:38,280
Speaker 4: maybe on the flip side of that, if the data

455
00:21:38,280 --> 00:21:41,520
Speaker 4: comes in still a little bit more persistently stubbornly high

456
00:21:41,520 --> 00:21:43,399
Speaker 4: on the inflation front, to where they might have to

457
00:21:43,440 --> 00:21:45,560
Speaker 4: continue with these rate increases.

458
00:21:46,600 --> 00:21:48,520
Speaker 11: Yeah, we think they will, you know, so they'll skip

459
00:21:48,600 --> 00:21:51,159
Speaker 11: then in July they could hike, and it's possible I

460
00:21:51,160 --> 00:21:54,399
Speaker 11: wouldn't rule it out that they hike even another time

461
00:21:54,800 --> 00:21:57,359
Speaker 11: later this year, and it goes down to the I

462
00:21:57,359 --> 00:22:01,640
Speaker 11: would say inertia in the core inflation data. You need

463
00:22:01,680 --> 00:22:04,359
Speaker 11: a much bigger slowdown. In my view, point four percent

464
00:22:04,400 --> 00:22:05,800
Speaker 11: month a month is not going to cut it. So

465
00:22:05,840 --> 00:22:09,480
Speaker 11: you need something like point one or even flat readings,

466
00:22:10,040 --> 00:22:12,800
Speaker 11: which tend to be pretty rare historically. I think that's

467
00:22:12,840 --> 00:22:16,960
Speaker 11: the key takeaway. So I don't really see scope for that.

468
00:22:17,000 --> 00:22:19,919
Speaker 11: In fact, we may see rent slow down. I think

469
00:22:19,920 --> 00:22:24,040
Speaker 11: there's a lot of forecaster expectation of that, given what

470
00:22:24,080 --> 00:22:26,399
Speaker 11: we've seen in house prices and given what we've seen

471
00:22:26,400 --> 00:22:30,159
Speaker 11: in maybe some private sector rent metrics, So the investors

472
00:22:30,240 --> 00:22:32,920
Speaker 11: or investors and forecast is already expecting that we could

473
00:22:32,920 --> 00:22:36,359
Speaker 11: see some offset, though other categories which have been weak

474
00:22:37,040 --> 00:22:41,000
Speaker 11: all year could surprise the upsie layer this year. So

475
00:22:41,000 --> 00:22:43,440
Speaker 11: one that I would point out is medical care services.

476
00:22:43,640 --> 00:22:45,840
Speaker 11: Medical care services have been negative, so there's been a

477
00:22:45,920 --> 00:22:50,040
Speaker 11: drag on inflation since last fall. I think a lot

478
00:22:50,080 --> 00:22:52,240
Speaker 11: of that has to do with how the CPI is

479
00:22:52,600 --> 00:22:57,679
Speaker 11: calculating the health insurance figures. So we've been pretty negative,

480
00:22:57,760 --> 00:23:00,240
Speaker 11: dragging down over all inflation. That could change as we

481
00:23:00,280 --> 00:23:02,160
Speaker 11: get into the fall, and then it could be a positive.

482
00:23:02,200 --> 00:23:04,760
Speaker 11: So all in all, you might get a slow down rents,

483
00:23:04,800 --> 00:23:06,840
Speaker 11: but that could be offset by a pickup in medical

484
00:23:06,880 --> 00:23:09,840
Speaker 11: care services and then your overall core inflation won't slow

485
00:23:10,320 --> 00:23:12,640
Speaker 11: that much at all, and that's going to be problematic

486
00:23:12,720 --> 00:23:13,800
Speaker 11: for the Fed in the second half.

487
00:23:14,160 --> 00:23:17,439
Speaker 4: Jeffrey, you have to get your take on the recession debate.

488
00:23:17,480 --> 00:23:20,440
Speaker 4: If you look at the ECFC function in the terminal

489
00:23:20,440 --> 00:23:24,200
Speaker 4: where you can see these projections for economists pulled by Bloomberg,

490
00:23:24,240 --> 00:23:27,320
Speaker 4: if you look annually, you aren't seeing that contraction there,

491
00:23:27,320 --> 00:23:30,120
Speaker 4: and growth prelate quarter of requard continues to get pushed out.

492
00:23:30,160 --> 00:23:32,359
Speaker 4: Now it's just slightly about like five tens of percent

493
00:23:32,400 --> 00:23:34,920
Speaker 4: contraction in the third quarter, a little bit around the

494
00:23:34,960 --> 00:23:37,040
Speaker 4: same ballpark in the fourth quarter. But it seems like

495
00:23:37,080 --> 00:23:41,000
Speaker 4: investors are even economists in particular, still keep being pushing

496
00:23:41,040 --> 00:23:45,119
Speaker 4: back those recession expectations. What's your call there, Yeah.

497
00:23:45,000 --> 00:23:47,760
Speaker 11: I think you have to push out your recession expectations.

498
00:23:47,760 --> 00:23:48,040
Speaker 6: Again.

499
00:23:48,880 --> 00:23:51,879
Speaker 11: We've been joking. This is the most forecast in recession ever.

500
00:23:52,560 --> 00:23:55,040
Speaker 11: Everyone says it's imminent, and then another month of data

501
00:23:55,080 --> 00:23:57,160
Speaker 11: goes by and we see that it's not. I think,

502
00:23:57,680 --> 00:24:00,719
Speaker 11: to be fair to my bearish colleagues, you look at

503
00:24:00,760 --> 00:24:03,520
Speaker 11: leading indicators, if you look at the yield curve, if

504
00:24:03,520 --> 00:24:05,159
Speaker 11: you look at how much the feed is tightened in

505
00:24:05,160 --> 00:24:08,000
Speaker 11: the last fifteen months or so, I think it is

506
00:24:08,200 --> 00:24:10,960
Speaker 11: it is is correct, you know, or it is good

507
00:24:10,960 --> 00:24:14,639
Speaker 11: to be prudent, to be cautious. However, for us, simple,

508
00:24:14,720 --> 00:24:16,679
Speaker 11: simple way to look at it. Look at the jobs report.

509
00:24:17,000 --> 00:24:19,680
Speaker 11: Look at the spending power that the consumer has. When

510
00:24:19,720 --> 00:24:21,719
Speaker 11: you think about how many people are employed and how

511
00:24:21,800 --> 00:24:25,959
Speaker 11: much they're earning in aggregate, that's growing around seven percent

512
00:24:26,119 --> 00:24:29,240
Speaker 11: year on year through the latest set of data. You

513
00:24:29,240 --> 00:24:31,240
Speaker 11: know from the Jobs report that we got a week

514
00:24:31,359 --> 00:24:34,000
Speaker 11: or so ago. So right there, that tells you the

515
00:24:34,000 --> 00:24:37,280
Speaker 11: consumer still has spending power. That's really key for us.

516
00:24:37,400 --> 00:24:39,280
Speaker 11: So that means the recession is not imminent. I think

517
00:24:39,600 --> 00:24:41,120
Speaker 11: if you want to push it out in your forecast,

518
00:24:41,160 --> 00:24:43,480
Speaker 11: maybe sometime in the middle of next year would be

519
00:24:43,520 --> 00:24:45,359
Speaker 11: a better It doesn't seem like it's going to be

520
00:24:45,359 --> 00:24:48,360
Speaker 11: a Q three or a Q four occurrence in our view.

521
00:24:48,520 --> 00:24:50,480
Speaker 1: Hey, Jeff, we know you hang out with the Hollywood crowd.

522
00:24:50,880 --> 00:24:53,120
Speaker 1: What's going on with the writers strike out there? What's

523
00:24:53,119 --> 00:24:54,160
Speaker 1: the status?

524
00:24:54,840 --> 00:24:56,480
Speaker 11: You know, I don't hang out with the hall of

525
00:24:56,520 --> 00:24:59,399
Speaker 11: this crowd. I appreciate you trying to loop me in

526
00:24:59,440 --> 00:25:02,000
Speaker 11: with the cool kids, but I don't get those invites.

527
00:25:02,440 --> 00:25:04,720
Speaker 11: Somehow they don't want to hang out and talk about CPI.

528
00:25:04,880 --> 00:25:07,120
Speaker 1: So that is, uh, that's a real issue for that's

529
00:25:07,119 --> 00:25:08,720
Speaker 1: a real issue for that area out there.

530
00:25:09,160 --> 00:25:11,080
Speaker 11: Yeah, in the past it has been, you know, I

531
00:25:11,119 --> 00:25:14,320
Speaker 11: would say in California in general, we're already feeling I

532
00:25:14,320 --> 00:25:16,280
Speaker 11: would say a bigger slowdown. If you look at the

533
00:25:16,600 --> 00:25:20,119
Speaker 11: unemployment rat in California, it's already up half a percentage

534
00:25:20,240 --> 00:25:23,760
Speaker 11: or more since the lows so and so part of

535
00:25:23,800 --> 00:25:27,040
Speaker 11: that could be due to Hollywood I think the bigger story.

536
00:25:26,760 --> 00:25:28,320
Speaker 1: Paul right now is tech.

537
00:25:28,720 --> 00:25:32,640
Speaker 11: Yeah, we definitely felt the the you know, the very

538
00:25:32,640 --> 00:25:35,160
Speaker 11: near effects of the layoffs that you've seen in tech,

539
00:25:35,440 --> 00:25:37,639
Speaker 11: especially in Q one. So I think that is a

540
00:25:37,640 --> 00:25:40,000
Speaker 11: bigger factor than the Hollywood writers strike a at this

541
00:25:40,040 --> 00:25:40,560
Speaker 11: point for me.

542
00:25:40,520 --> 00:25:43,040
Speaker 1: All right, all right, well until we start missing our

543
00:25:43,080 --> 00:25:44,760
Speaker 1: fall shows and then we're all going to be worried

544
00:25:44,760 --> 00:25:48,200
Speaker 1: about it. Jeffrey Cleveland, director and chief economists at Peydon Rigal.

545
00:25:48,600 --> 00:25:51,760
Speaker 1: He is based in Los Angeles, with getting some la

546
00:25:51,840 --> 00:25:52,800
Speaker 1: color from him when we.

547
00:25:52,760 --> 00:25:55,720
Speaker 4: Can, definitely and also bring in the sunshine.

548
00:25:57,119 --> 00:26:00,960
Speaker 5: You're listening to the Team Cancer Live program Bloomberg Markets

549
00:26:01,000 --> 00:26:04,080
Speaker 5: weekdays at ten am Eastern on Bloomberg dot Com, the

550
00:26:04,200 --> 00:26:07,320
Speaker 5: iHeartRadio app, and the Bloomberg Business App, or listen on

551
00:26:07,359 --> 00:26:09,320
Speaker 5: demand wherever you get your podcasts.

552
00:26:12,000 --> 00:26:15,080
Speaker 1: Chris Whalen, he's a founder whaling Global Advisors. Hey, Chris,

553
00:26:15,359 --> 00:26:18,200
Speaker 1: we got the CPI print today. Kind of how does

554
00:26:18,200 --> 00:26:20,680
Speaker 1: that inform I don't know your view of what we'll

555
00:26:20,720 --> 00:26:22,880
Speaker 1: hear from the FED tomorrow. How does that inform kind

556
00:26:22,880 --> 00:26:25,719
Speaker 1: of your view of markets? Any change there?

557
00:26:26,880 --> 00:26:31,240
Speaker 6: Well, I think it's given you know, the manager class

558
00:26:31,280 --> 00:26:35,080
Speaker 6: reasons to go out and buy stocks. My banks are

559
00:26:35,160 --> 00:26:39,399
Speaker 6: running very well, all green other than Deutsche Bank. We

560
00:26:39,440 --> 00:26:43,560
Speaker 6: want to pay attention to them. So the managers want

561
00:26:43,560 --> 00:26:47,320
Speaker 6: to buy it. They will. You know, people don't realize

562
00:26:47,359 --> 00:26:49,800
Speaker 6: that the lesson of the first quarter was it banks

563
00:26:49,880 --> 00:26:53,800
Speaker 6: or not really stocks. They're actually heavily levered credit trades.

564
00:26:54,040 --> 00:26:56,280
Speaker 6: But it doesn't matter. They want to own them and

565
00:26:56,320 --> 00:26:58,800
Speaker 6: they will. I mean, so far is the best performer

566
00:26:59,320 --> 00:27:02,159
Speaker 6: last year? Well, the ubs and Discover.

567
00:27:02,880 --> 00:27:05,920
Speaker 4: There you were, Chris, what are you buying?

568
00:27:05,960 --> 00:27:06,639
Speaker 1: What are you selling?

569
00:27:08,119 --> 00:27:10,600
Speaker 6: Well? I did buy a little bit of a New

570
00:27:10,680 --> 00:27:13,320
Speaker 6: York Community Bank. We've talked about that because I know

571
00:27:13,400 --> 00:27:16,320
Speaker 6: the guys at Flagstar very well. I'm a mortgage guy.

572
00:27:16,880 --> 00:27:19,200
Speaker 6: We're going to wait on that one, though, because obviously

573
00:27:19,280 --> 00:27:21,240
Speaker 6: rates aren't going to fall for a while, and that's

574
00:27:21,280 --> 00:27:25,280
Speaker 6: a bull market housing trade. Even though you think of

575
00:27:25,280 --> 00:27:27,399
Speaker 6: it as a New York regional bank, it's now a

576
00:27:27,520 --> 00:27:31,560
Speaker 6: national mortgage bank, so you're gonna have to It's funny

577
00:27:31,600 --> 00:27:34,159
Speaker 6: they actually use the flag Star name outside of New

578
00:27:34,280 --> 00:27:36,679
Speaker 6: York because he can't say New York Community Bank in

579
00:27:36,720 --> 00:27:41,760
Speaker 6: California exactly. It wouldn't work. But you know, it's now

580
00:27:41,800 --> 00:27:46,480
Speaker 6: one hundred plus billion dollar mortgage specialist, and meanwhile Comerica

581
00:27:46,560 --> 00:27:50,040
Speaker 6: is tiptoeing out of the mortgage space. This morning, very

582
00:27:50,040 --> 00:27:53,280
Speaker 6: interesting report I saw. So I guess what I would

583
00:27:53,280 --> 00:27:56,600
Speaker 6: tell you is the inflation numbers are making people feel better,

584
00:27:56,640 --> 00:27:59,200
Speaker 6: but they want to feel better. You know. The bias

585
00:27:59,359 --> 00:28:02,880
Speaker 6: of the entire audience in finance in the United States

586
00:28:02,960 --> 00:28:06,080
Speaker 6: is long. Yeah, that's how we get paid, so you know.

587
00:28:06,600 --> 00:28:09,000
Speaker 1: Chris, I mean, I mean, is it time for me

588
00:28:09,080 --> 00:28:12,240
Speaker 1: to go out and buy some quality regional banks? I

589
00:28:12,240 --> 00:28:14,320
Speaker 1: don't know, an M and T bank, something like that.

590
00:28:14,400 --> 00:28:16,520
Speaker 1: I mean, I felt like so many banks are thrown

591
00:28:16,520 --> 00:28:19,280
Speaker 1: out kind of with the bathwater over the last four

592
00:28:19,359 --> 00:28:20,719
Speaker 1: or five six weeks. Is it okay to go out

593
00:28:20,720 --> 00:28:21,919
Speaker 1: there and buy them or do we still have some

594
00:28:22,600 --> 00:28:24,199
Speaker 1: real concerns out there about the sector?

595
00:28:25,280 --> 00:28:28,600
Speaker 6: Well, there are real fundamental concerns about the sector. Everyone

596
00:28:28,680 --> 00:28:32,479
Speaker 6: knows this. The FED took the pistol out of our

597
00:28:32,600 --> 00:28:36,840
Speaker 6: mountains by putting the funding facility out there. That brought

598
00:28:36,920 --> 00:28:40,480
Speaker 6: us some time, but it doesn't change the negative cash flow.

599
00:28:40,960 --> 00:28:44,240
Speaker 6: I wrote about this in the blog yesterday. The amount

600
00:28:44,320 --> 00:28:47,320
Speaker 6: of paper that people are sitting on that they're losing

601
00:28:47,440 --> 00:28:51,360
Speaker 6: money on every day is growing. You know, Bill Nelson

602
00:28:51,400 --> 00:28:54,360
Speaker 6: at Bank Policy Institute writes great stuff on the FED,

603
00:28:54,640 --> 00:28:56,520
Speaker 6: and he talked about the fact that they're losing a

604
00:28:56,560 --> 00:28:59,560
Speaker 6: billion dollars a day at the FED because of the

605
00:28:59,600 --> 00:29:02,080
Speaker 6: difference between what they earn and what they're paying out.

606
00:29:02,400 --> 00:29:05,600
Speaker 6: Same thing with the banks. So depending on who it is,

607
00:29:05,920 --> 00:29:08,600
Speaker 6: and depending on your willingness to sit with it all

608
00:29:08,680 --> 00:29:13,760
Speaker 6: year until the real fundamentals for banks improve. That's really

609
00:29:13,840 --> 00:29:15,400
Speaker 6: the question you got to ask. Are they cheap?

610
00:29:15,480 --> 00:29:15,640
Speaker 7: Yes?

611
00:29:15,840 --> 00:29:19,040
Speaker 6: US Bank at one time's book my god, But I

612
00:29:19,280 --> 00:29:22,320
Speaker 6: just made a decision in twenty to move up the

613
00:29:22,360 --> 00:29:25,720
Speaker 6: capital structure into preferreds until I had a little more

614
00:29:25,800 --> 00:29:29,880
Speaker 6: visibility on banks because the FED took so much earning

615
00:29:29,960 --> 00:29:33,120
Speaker 6: power away from banks during QI, and they're now trying

616
00:29:33,160 --> 00:29:36,680
Speaker 6: to readjust their cost structure and what they earn on

617
00:29:36,720 --> 00:29:39,520
Speaker 6: their assets for the future. But that means a year

618
00:29:39,560 --> 00:29:41,960
Speaker 6: from that. So if you buy banks, you got to

619
00:29:42,000 --> 00:29:42,479
Speaker 6: be patient.

620
00:29:42,840 --> 00:29:45,480
Speaker 1: How important are management teams when I'm looking at a

621
00:29:45,560 --> 00:29:48,160
Speaker 1: bank stock, Oh, very crucial?

622
00:29:48,360 --> 00:29:48,560
Speaker 5: Yeah.

623
00:29:49,280 --> 00:29:53,400
Speaker 6: Do they understand duration number one? And do they understand credit?

624
00:29:54,200 --> 00:29:56,640
Speaker 6: Because if you look at Silicon Valley Bank, these guys

625
00:29:56,680 --> 00:30:00,000
Speaker 6: basically shot themselves in the head they kept buying more

626
00:30:00,120 --> 00:30:02,920
Speaker 6: mortgage backs, and then half the book prepaid, they bought

627
00:30:02,960 --> 00:30:06,160
Speaker 6: more and by twenty one, end of twenty one, that

628
00:30:06,240 --> 00:30:09,520
Speaker 6: bank is dead. They just didn't know it yet. So,

629
00:30:10,280 --> 00:30:12,680
Speaker 6: you know, credit is the second thing we're going into.

630
00:30:12,680 --> 00:30:14,760
Speaker 6: Maybe a recession. I don't know, guys, So we haven't

631
00:30:14,760 --> 00:30:17,440
Speaker 6: a recession. I think this economy is going to ignore

632
00:30:17,480 --> 00:30:20,240
Speaker 6: the Fed. What do we do then? What do we

633
00:30:20,280 --> 00:30:22,360
Speaker 6: do if we just continue to chug along the way?

634
00:30:22,440 --> 00:30:26,880
Speaker 6: We are no recession? Think about what the FED has done.

635
00:30:26,960 --> 00:30:29,280
Speaker 6: They have increased the cost of credit for the front

636
00:30:29,400 --> 00:30:33,440
Speaker 6: end of the economy, the productive part, but the long end. No,

637
00:30:34,480 --> 00:30:36,520
Speaker 6: are we going to die because mortgage rates are at

638
00:30:36,560 --> 00:30:40,680
Speaker 6: seven percent? No, We're going to do business. So I

639
00:30:40,720 --> 00:30:44,000
Speaker 6: think the private sector is incredibly strong in this country,

640
00:30:44,520 --> 00:30:48,400
Speaker 6: and maybe those rate cuts during COVID were unnecessary.

641
00:30:50,320 --> 00:30:52,800
Speaker 4: Chris coming out just a few months after a lot

642
00:30:52,800 --> 00:30:55,560
Speaker 4: of those concerns about some of those regional bank stresses

643
00:30:55,600 --> 00:30:59,000
Speaker 4: in March, what are deposit flows telling us at this point?

644
00:31:00,560 --> 00:31:02,720
Speaker 6: Well, they kind of came back by the end of

645
00:31:02,720 --> 00:31:06,080
Speaker 6: the quarter. In other words, the outflows slowed down. This

646
00:31:06,280 --> 00:31:09,960
Speaker 6: was partly because Treasury wasn't selling any paper and The

647
00:31:10,080 --> 00:31:12,800
Speaker 6: delay with the debt ceiling now forces them to go

648
00:31:12,880 --> 00:31:16,280
Speaker 6: out and basically refund about a trillion dollars, and they

649
00:31:16,320 --> 00:31:19,760
Speaker 6: are outflows constantly during this period, so they'll end up

650
00:31:19,800 --> 00:31:24,040
Speaker 6: with six seven hundred billion sitting in the TGA. But unfortunately,

651
00:31:24,120 --> 00:31:26,880
Speaker 6: every dollar they raise means that a bank deposits going

652
00:31:26,920 --> 00:31:31,480
Speaker 6: to disappear because Treasury is indeficit. Every time a bond

653
00:31:31,520 --> 00:31:34,360
Speaker 6: on the books of the FED matures, Treasury has to

654
00:31:34,400 --> 00:31:38,800
Speaker 6: refinance that bond immediately, So that's why banks are under

655
00:31:38,840 --> 00:31:42,320
Speaker 6: so much pressure. Now. We're hoping that the difference between

656
00:31:42,320 --> 00:31:45,280
Speaker 6: the reverses that the FED has been maintaining for money

657
00:31:45,280 --> 00:31:48,080
Speaker 6: market funds to help them are going to run off.

658
00:31:48,360 --> 00:31:51,000
Speaker 6: We're hoping that that problem is going to leave and

659
00:31:51,040 --> 00:31:54,160
Speaker 6: the FED is going to be able to simplify policy

660
00:31:54,280 --> 00:31:57,880
Speaker 6: going forward by not having to support banks and the

661
00:31:58,000 --> 00:32:02,200
Speaker 6: GSS and the money market funds with the reverse repurchase agreements.

662
00:32:02,640 --> 00:32:05,880
Speaker 6: That would simplify life a little bit for Chairman Powell.

663
00:32:06,560 --> 00:32:08,600
Speaker 6: But other than that, I think they got to run

664
00:32:08,600 --> 00:32:10,440
Speaker 6: off the bounce sheet. My hope is they're going to

665
00:32:10,520 --> 00:32:14,360
Speaker 6: pause and start selling more bonds. What I would do

666
00:32:14,400 --> 00:32:16,280
Speaker 6: if I were Powells is I would tell the FETE

667
00:32:16,280 --> 00:32:19,640
Speaker 6: of New York, make sure you hit the cap every

668
00:32:19,720 --> 00:32:22,959
Speaker 6: month for the runoff of the mortgage backed security. So

669
00:32:23,000 --> 00:32:25,920
Speaker 6: if the natural runoff is half of the cap, that

670
00:32:26,000 --> 00:32:27,640
Speaker 6: means they got to sell some bonds.

671
00:32:28,120 --> 00:32:32,240
Speaker 4: You're when you're talking about money market funds specifically, because

672
00:32:32,280 --> 00:32:34,480
Speaker 4: so much money has been plowed into those, At what

673
00:32:34,520 --> 00:32:36,320
Speaker 4: point you can see even more of that money go

674
00:32:36,440 --> 00:32:37,240
Speaker 4: toward equities?

675
00:32:38,200 --> 00:32:40,760
Speaker 6: Well, that's the thing it was. It was rising over

676
00:32:40,760 --> 00:32:43,600
Speaker 6: the last couple of months, so over two trillion dollars.

677
00:32:43,640 --> 00:32:46,400
Speaker 6: Now that if half of that money went back in act,

678
00:32:46,400 --> 00:32:49,160
Speaker 6: what he's going to be a tremendous boot to the market.

679
00:32:49,520 --> 00:32:51,680
Speaker 6: But I think more likely it's going to go into

680
00:32:51,680 --> 00:32:54,760
Speaker 6: T bills because these are not risky funds, these are

681
00:32:54,760 --> 00:32:55,640
Speaker 6: money markets.

682
00:32:55,720 --> 00:32:57,800
Speaker 4: Is it because of just being able to deald more

683
00:32:57,840 --> 00:32:58,640
Speaker 4: than five for sure?

684
00:32:59,240 --> 00:33:01,480
Speaker 6: Sure? If youre going to pick up thirty BIPs by

685
00:33:01,520 --> 00:33:03,720
Speaker 6: going out of money market funds and the T bills,

686
00:33:03,720 --> 00:33:06,400
Speaker 6: you're going to do it. Absolutely. I just took a

687
00:33:06,400 --> 00:33:09,000
Speaker 6: big pile off the table on a video I had

688
00:33:09,040 --> 00:33:11,959
Speaker 6: gone in in twenty twenty one. I was staring at

689
00:33:11,960 --> 00:33:14,360
Speaker 6: a one hundred and fifty percent game. I had to

690
00:33:14,400 --> 00:33:18,320
Speaker 6: take it I put it in T bills, you know exactly.

691
00:33:19,280 --> 00:33:22,240
Speaker 6: And remember if you sell a money market fund and

692
00:33:22,360 --> 00:33:26,360
Speaker 6: buy a T bill, but deposit disappears, it's a producery deposit,

693
00:33:26,480 --> 00:33:30,000
Speaker 6: but it still disappears. So the system is going to

694
00:33:30,000 --> 00:33:33,400
Speaker 6: be running off cash banking system as the FED balance

695
00:33:33,440 --> 00:33:35,760
Speaker 6: sheet shrinks. How far can we go?

696
00:33:35,960 --> 00:33:36,160
Speaker 7: Yep?

697
00:33:36,200 --> 00:33:38,280
Speaker 6: That's the real that's the big question, all.

698
00:33:38,280 --> 00:33:40,360
Speaker 1: Right, Chris, Chris, always good stuff. We love, We appreciate

699
00:33:40,360 --> 00:33:43,000
Speaker 1: getting few minutes of your time. Chris Whalen. He's a

700
00:33:43,080 --> 00:33:45,840
Speaker 1: chairman of Whaling Global Advisors and just one of the

701
00:33:45,880 --> 00:33:49,640
Speaker 1: top I think bank analysts out there that like talking to.

702
00:33:49,760 --> 00:33:51,120
Speaker 1: And it was just great, you know, over the last

703
00:33:51,240 --> 00:33:54,480
Speaker 1: couple three months when we're having those real big stories

704
00:33:54,520 --> 00:33:56,400
Speaker 1: about some of those regional banks, he was just critical

705
00:33:56,440 --> 00:33:58,160
Speaker 1: for us kind of getting a handle on that. So

706
00:33:58,960 --> 00:34:01,160
Speaker 1: good touching base with Chris Wayll and a Whale and

707
00:34:01,200 --> 00:34:01,960
Speaker 1: Global Advisors.

708
00:34:02,120 --> 00:34:05,160
Speaker 5: You're listening to the tape. Ken's are Live program Bloomberg

709
00:34:05,280 --> 00:34:08,880
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

710
00:34:08,920 --> 00:34:10,879
Speaker 5: tune in app, Bloomberg dot Com, and.

711
00:34:10,840 --> 00:34:12,160
Speaker 7: The Bloomberg Business app.

712
00:34:12,200 --> 00:34:15,000
Speaker 5: You can also listen live on Amazon Alexa from our

713
00:34:15,040 --> 00:34:19,399
Speaker 5: flagship New York station. Just say Alexa play Bloomberg eleven.

714
00:34:19,120 --> 00:34:22,800
Speaker 1: Thirty, Jess Men and Paul Sweeney here in the Bloomberg

715
00:34:22,880 --> 00:34:25,160
Speaker 1: Interactive Brokers Studio. Want to get right to our next guest,

716
00:34:25,160 --> 00:34:27,759
Speaker 1: because I'm going to talk about markets and where to

717
00:34:27,800 --> 00:34:30,239
Speaker 1: go here, because there's a lot of economic data flying out,

718
00:34:30,360 --> 00:34:32,560
Speaker 1: flying around out there. It's a big week. I want

719
00:34:32,560 --> 00:34:34,879
Speaker 1: to know what the pros are doing and what they're

720
00:34:34,880 --> 00:34:37,000
Speaker 1: telling their clients. Tim Pagliarra joins, and he is the

721
00:34:37,040 --> 00:34:41,719
Speaker 1: CIO of cap Wealth based down in Tennessee. Our good

722
00:34:41,719 --> 00:34:43,799
Speaker 1: friends down in Tennessee. Tim, thanks so much for joining

723
00:34:43,880 --> 00:34:46,360
Speaker 1: us here. We're in Tennessee. Are you Franklin?

724
00:34:47,200 --> 00:34:48,160
Speaker 12: Franklin, Tennessee?

725
00:34:48,280 --> 00:34:48,560
Speaker 7: All right?

726
00:34:48,600 --> 00:34:50,560
Speaker 1: You have to answer one question from him? Dying to

727
00:34:50,560 --> 00:34:54,120
Speaker 1: know this about Nashville. Why has Nashville become the bachelorette

728
00:34:54,520 --> 00:34:56,680
Speaker 1: party capital of the world.

729
00:34:57,360 --> 00:34:59,000
Speaker 4: What about Austin? Austin's a lot of fun.

730
00:34:58,960 --> 00:35:01,439
Speaker 1: I think, I don't know what. Tell me Nationals where

731
00:35:01,440 --> 00:35:02,480
Speaker 1: the youngest leaders are going.

732
00:35:02,719 --> 00:35:03,840
Speaker 4: Yeah, that's where the kids go.

733
00:35:04,040 --> 00:35:07,120
Speaker 12: I think, because they facilitate it, they'll let them do

734
00:35:07,280 --> 00:35:08,120
Speaker 12: just about anything.

735
00:35:09,800 --> 00:35:12,040
Speaker 1: All right. I just I went down there on a

736
00:35:12,080 --> 00:35:13,480
Speaker 1: business trip and they were all over the place.

737
00:35:13,560 --> 00:35:14,160
Speaker 13: You're not wrong.

738
00:35:14,960 --> 00:35:17,480
Speaker 12: It used to be Vegas, but now it's what happens

739
00:35:17,520 --> 00:35:19,839
Speaker 12: in Nashville, all right.

740
00:35:19,880 --> 00:35:22,440
Speaker 1: Good to know. And Franklin is just outside of Nashville,

741
00:35:22,440 --> 00:35:25,080
Speaker 1: so hopefully safely outside there. So Tim, you know, we've

742
00:35:25,120 --> 00:35:27,279
Speaker 1: had a nice run in this market. But I want

743
00:35:27,320 --> 00:35:29,320
Speaker 1: to get your thoughts on. If I look at SPX,

744
00:35:29,360 --> 00:35:31,520
Speaker 1: I see a nice story up, you know, eleven twelve percent.

745
00:35:31,560 --> 00:35:34,600
Speaker 1: If I look at SPW the equal weighted, it's kind

746
00:35:34,640 --> 00:35:38,040
Speaker 1: of flat. So I got the magnificent seven stocks kind

747
00:35:38,040 --> 00:35:42,040
Speaker 1: of ruling the day here. Is that a concern for you?

748
00:35:42,200 --> 00:35:42,680
Speaker 6: Very much? So?

749
00:35:43,280 --> 00:35:47,319
Speaker 12: I mean, it's frothy, and it is a sign that

750
00:35:48,960 --> 00:35:51,600
Speaker 12: you know it can't continue, you know, because we were

751
00:35:51,600 --> 00:35:57,359
Speaker 12: pushing valuations before, and the seven stocks are accounting for

752
00:35:57,440 --> 00:36:00,480
Speaker 12: about ninety five ninety six percent of their turn the index.

753
00:36:01,440 --> 00:36:04,760
Speaker 4: I got to ask, though, because looking month to date,

754
00:36:05,040 --> 00:36:09,200
Speaker 4: you're starting to see some of these other sectors beginning

755
00:36:09,280 --> 00:36:12,920
Speaker 4: to pick up, whether you're looking at industrials, energy, financials,

756
00:36:13,840 --> 00:36:18,080
Speaker 4: also small caps auditear up more than eight percent this month.

757
00:36:18,600 --> 00:36:20,000
Speaker 4: What do you need to see happen to give you

758
00:36:20,040 --> 00:36:21,920
Speaker 4: more conviction that this is broadening.

759
00:36:21,480 --> 00:36:28,239
Speaker 12: Out, I think guidance from the Fed about what they're

760
00:36:28,280 --> 00:36:31,000
Speaker 12: going to do and how much time they are going

761
00:36:31,120 --> 00:36:35,840
Speaker 12: to allow us to get to that two percent inflation target.

762
00:36:36,040 --> 00:36:38,640
Speaker 12: Bloomberg had a good survey that was out this week,

763
00:36:40,400 --> 00:36:43,120
Speaker 12: and fifty four percent of the respondents felt like it

764
00:36:43,200 --> 00:36:46,239
Speaker 12: was going to take a little over two years to

765
00:36:46,280 --> 00:36:50,400
Speaker 12: get to that two percent inflation target. About eleven percent

766
00:36:50,440 --> 00:36:53,560
Speaker 12: of the respondents felt like it would take five years.

767
00:36:54,000 --> 00:36:57,640
Speaker 12: So it's just a question of how much patience the

768
00:36:57,680 --> 00:37:00,520
Speaker 12: FED is going to have and how concerned they are

769
00:37:01,120 --> 00:37:04,560
Speaker 12: that they may break something if they push too hard.

770
00:37:04,680 --> 00:37:06,799
Speaker 12: And there's a lot of signs of stress in the

771
00:37:06,840 --> 00:37:07,719
Speaker 12: system right now.

772
00:37:08,160 --> 00:37:12,640
Speaker 4: So given that backdrop, how are you positioning very very

773
00:37:12,640 --> 00:37:17,880
Speaker 4: defensively really, and even even after eight months, systems below

774
00:37:17,960 --> 00:37:20,920
Speaker 4: in October and just have to.

775
00:37:20,880 --> 00:37:24,160
Speaker 12: Be you have to be disciplined and this and the

776
00:37:24,239 --> 00:37:28,279
Speaker 12: first time in I think it's twelve fourteen years, we've

777
00:37:28,280 --> 00:37:33,719
Speaker 12: got a fifteen percent position in treasuries. The FAD, you know,

778
00:37:33,760 --> 00:37:37,480
Speaker 12: they've got problems that they have to fix. And even

779
00:37:37,520 --> 00:37:40,920
Speaker 12: this past week where you saw the park turned the

780
00:37:41,000 --> 00:37:45,480
Speaker 12: keys back over to their properties in Union Square and

781
00:37:45,600 --> 00:37:49,520
Speaker 12: walk away from you know too magnificent hotel property. Yep,

782
00:37:49,840 --> 00:37:52,520
Speaker 12: that has a ripple effect through the system. It's not

783
00:37:52,600 --> 00:37:56,080
Speaker 12: just that property and it's not just San Francisco, and

784
00:37:56,160 --> 00:37:59,080
Speaker 12: so those are the things that you have to watch

785
00:37:59,160 --> 00:38:02,080
Speaker 12: and be conser learned about in the contagion what it

786
00:38:02,120 --> 00:38:04,799
Speaker 12: could cause for the rest of the markets.

787
00:38:05,320 --> 00:38:08,120
Speaker 1: You know, we're just looking. Abigail Doolittle, who covers the

788
00:38:08,160 --> 00:38:12,560
Speaker 1: markets for Bloomberg, she mentioned earlier today that you know,

789
00:38:12,600 --> 00:38:14,200
Speaker 1: this market's starting to broaden out a little bit in

790
00:38:14,239 --> 00:38:16,400
Speaker 1: the last couple of weeks, and she point out to

791
00:38:16,440 --> 00:38:19,720
Speaker 1: like the Russell two thousand up one point one today

792
00:38:19,760 --> 00:38:22,600
Speaker 1: outperforming the S and P five hundred. Is small mid

793
00:38:22,640 --> 00:38:25,280
Speaker 1: cap a place where you think people should be looking

794
00:38:25,320 --> 00:38:27,520
Speaker 1: to the extent that maybe they missed them that big

795
00:38:27,560 --> 00:38:28,120
Speaker 1: cap rally.

796
00:38:29,600 --> 00:38:32,880
Speaker 12: Absolutely. I mean we take an all cap approach, and

797
00:38:32,960 --> 00:38:36,799
Speaker 12: I think you can find some some great values, you know,

798
00:38:36,920 --> 00:38:40,920
Speaker 12: in that sector right now. But it is an individual

799
00:38:41,120 --> 00:38:46,879
Speaker 12: stock market, and so people that own individual securities and

800
00:38:46,920 --> 00:38:50,279
Speaker 12: that are not you know, dependent on the indexes for

801
00:38:50,360 --> 00:38:53,240
Speaker 12: their returns, they're the they're going to be the beneficiaries

802
00:38:53,280 --> 00:38:53,879
Speaker 12: of all of us.

803
00:38:54,040 --> 00:38:57,200
Speaker 4: What are your top stock picks?

804
00:38:57,880 --> 00:39:01,440
Speaker 12: Yeah, and very broadly, we still Likeshire halfaway because of

805
00:39:01,480 --> 00:39:02,320
Speaker 12: the cash position.

806
00:39:02,440 --> 00:39:04,880
Speaker 4: You know, that's actually getting close class B shares close

807
00:39:04,960 --> 00:39:07,560
Speaker 4: to a record, and obviously they have a very hefty

808
00:39:07,680 --> 00:39:09,080
Speaker 4: steak in Apple as.

809
00:39:08,960 --> 00:39:13,880
Speaker 12: We know, right, But you know, so I would be

810
00:39:14,360 --> 00:39:21,280
Speaker 12: I like Berkshire, I like CBS. We like a company

811
00:39:21,360 --> 00:39:23,759
Speaker 12: that I really can't mention it because it's below five

812
00:39:23,840 --> 00:39:28,839
Speaker 12: dollars and they're in transition, but they're in the they're

813
00:39:28,880 --> 00:39:37,080
Speaker 12: in the technology space, yeah, in fighting internet, high speed fiber.

814
00:39:38,440 --> 00:39:40,399
Speaker 12: So I think you just have to look at those

815
00:39:40,480 --> 00:39:44,799
Speaker 12: companies that have been hit really hard because of maybe

816
00:39:44,840 --> 00:39:48,239
Speaker 12: their balance sheet and was overreacting, you know to that,

817
00:39:48,680 --> 00:39:51,880
Speaker 12: because we believe it's important to have strong balance sheets

818
00:39:51,920 --> 00:39:54,400
Speaker 12: and not have to depend on the capital markets. But

819
00:39:54,440 --> 00:39:57,080
Speaker 12: you can also take that a little too far. And

820
00:39:57,160 --> 00:39:59,279
Speaker 12: so those are some of the companies we're looking at.

821
00:39:59,560 --> 00:40:03,719
Speaker 12: Regional banks. There are some that you know that have

822
00:40:03,840 --> 00:40:04,840
Speaker 12: come up on the radar.

823
00:40:05,120 --> 00:40:06,759
Speaker 4: Which which regionals do you like?

824
00:40:07,160 --> 00:40:09,719
Speaker 12: Well, I'm in an acquisition period on some of them,

825
00:40:09,719 --> 00:40:14,200
Speaker 12: so I can't. Okay, I can't say, but but that's

826
00:40:14,239 --> 00:40:17,520
Speaker 12: in a general way, that's what I would that's what

827
00:40:17,520 --> 00:40:18,200
Speaker 12: I would look at.

828
00:40:18,280 --> 00:40:18,759
Speaker 1: So you were.

829
00:40:18,640 --> 00:40:22,160
Speaker 4: Buying the dip then on those banks that potential ones

830
00:40:22,280 --> 00:40:24,719
Speaker 4: that obviously were seeing their stock prices for all the

831
00:40:24,760 --> 00:40:25,360
Speaker 4: last couple.

832
00:40:25,200 --> 00:40:29,759
Speaker 12: Of months, we're shuffling the deck. So I like to

833
00:40:29,800 --> 00:40:34,600
Speaker 12: compare it to, you know, being the general manager of

834
00:40:34,320 --> 00:40:37,719
Speaker 12: a football team and we're trying to improve the team

835
00:40:37,760 --> 00:40:40,000
Speaker 12: that we've got on the on the field. So that

836
00:40:40,120 --> 00:40:44,080
Speaker 12: might be peeling off some Apple and buying something else

837
00:40:44,120 --> 00:40:48,400
Speaker 12: that we like in that space without abandoning Apple.

838
00:40:49,120 --> 00:40:51,919
Speaker 4: You know, is it just because a little pricey after

839
00:40:51,920 --> 00:40:52,920
Speaker 4: the record run it's been on.

840
00:40:54,719 --> 00:40:57,920
Speaker 12: Yeah. And you know, fortunately, when you buy something at

841
00:40:57,920 --> 00:41:00,319
Speaker 12: a at a cheap price and it gets to a

842
00:41:00,360 --> 00:41:03,520
Speaker 12: client's portfolio and it's up to six or seven or

843
00:41:03,560 --> 00:41:05,880
Speaker 12: eight percent, then you you know, you have an obligation

844
00:41:06,120 --> 00:41:09,680
Speaker 12: really to to look at what you put seven or

845
00:41:09,680 --> 00:41:12,440
Speaker 12: eight percent of a client's money in a single company

846
00:41:12,560 --> 00:41:16,680
Speaker 12: to start out, and the answer is generally no. So

847
00:41:18,040 --> 00:41:21,560
Speaker 12: then you have to go through the process of selling

848
00:41:21,840 --> 00:41:25,040
Speaker 12: and then looking for things that you know represent a

849
00:41:25,120 --> 00:41:29,279
Speaker 12: better value and a longer runway for success.

850
00:41:29,840 --> 00:41:33,080
Speaker 1: Tim just about thirty seconds this AI hype boy. It's

851
00:41:33,080 --> 00:41:34,839
Speaker 1: moving a lot of names. How do you think about it?

852
00:41:36,840 --> 00:41:40,240
Speaker 12: I mean, if you know, if you've just used Navidia

853
00:41:40,320 --> 00:41:43,600
Speaker 12: as an example. You know, forty times sales is a

854
00:41:43,800 --> 00:41:47,960
Speaker 12: you know, it's an alarm bell. And I think what

855
00:41:48,239 --> 00:41:50,160
Speaker 12: in the end, at the end of the day, it's

856
00:41:50,239 --> 00:41:55,520
Speaker 12: not the chip. It is the software applications. It's the

857
00:41:55,640 --> 00:42:00,480
Speaker 12: use of those of that technology that's ultimately going to

858
00:42:00,600 --> 00:42:04,319
Speaker 12: have the value. You know, It's like Maverick, it's not

859
00:42:04,480 --> 00:42:09,440
Speaker 12: the it's not the plane, it's the pilot, right, you know,

860
00:42:09,520 --> 00:42:12,600
Speaker 12: it's going to be the software. You know, company like

861
00:42:12,719 --> 00:42:16,120
Speaker 12: paland here for example, is one of our you know,

862
00:42:16,239 --> 00:42:19,359
Speaker 12: one of the companies, right, greatly from that.

863
00:42:19,280 --> 00:42:21,480
Speaker 1: All right, Tim, thanks very much. Tim Pagley, our CIO

864
00:42:21,800 --> 00:42:24,840
Speaker 1: of cap Wealth, giving us his latest. This is Bloomberg.

865
00:42:25,080 --> 00:42:28,160
Speaker 5: You're listening to the tape. Can's our live program Bloomberg

866
00:42:28,239 --> 00:42:31,840
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

867
00:42:31,880 --> 00:42:34,040
Speaker 5: tune in app, Bloomberg dot Com, and the.

868
00:42:33,920 --> 00:42:35,120
Speaker 7: Bloomberg Business app.

869
00:42:35,160 --> 00:42:37,960
Speaker 5: You can also listen live on Amazon Alexa from our

870
00:42:38,000 --> 00:42:43,120
Speaker 5: flagship New York station, just say Alexa playing Bloomberg eleven thirty.

871
00:42:44,200 --> 00:42:47,120
Speaker 1: Let's do retail. What are you consumers buying in terms

872
00:42:47,160 --> 00:42:50,960
Speaker 1: of clothing? That's a big part. Yeah, exactly, Dnim, I'm

873
00:42:50,960 --> 00:42:53,480
Speaker 1: all in on that. I mean Scott Baxter joints his

874
00:42:53,560 --> 00:42:57,640
Speaker 1: Contour brands. That is a publicly traded symbol. Kt is

875
00:42:57,680 --> 00:42:58,160
Speaker 1: the ticker.

876
00:42:58,360 --> 00:43:00,799
Speaker 4: Yeah, I know, host a six percent today.

877
00:43:01,040 --> 00:43:03,600
Speaker 1: So all right, So Scott Baxter joins us, he's the CEO.

878
00:43:04,080 --> 00:43:06,320
Speaker 1: He joins us here in our Bloomberg and Active Broker studio.

879
00:43:06,320 --> 00:43:10,120
Speaker 1: They're based in where, North Carolina, Greensboro, Greensboro on a

880
00:43:10,120 --> 00:43:12,799
Speaker 1: beautiful place down there in Greensboro. Scott talked to us

881
00:43:12,800 --> 00:43:16,360
Speaker 1: about Contour brands. You've got the ones. I really know

882
00:43:16,400 --> 00:43:19,560
Speaker 1: what everybody knows what is Lee Jeans, Wrangler Wrangler, which

883
00:43:19,600 --> 00:43:21,839
Speaker 1: is if you're a cowboy Texas, that's it.

884
00:43:21,920 --> 00:43:22,319
Speaker 7: There you go.

885
00:43:22,400 --> 00:43:24,399
Speaker 4: If you're all the regulars in Texas, let me tell you.

886
00:43:25,320 --> 00:43:28,040
Speaker 1: Justice from Texas. What to Texas, A and M. Cowboys

887
00:43:28,040 --> 00:43:29,440
Speaker 1: only wear Wrangler, right, I.

888
00:43:29,360 --> 00:43:31,120
Speaker 4: Mean that's the predominant one, that.

889
00:43:31,160 --> 00:43:34,040
Speaker 10: Is true cowboys exactly.

890
00:43:34,239 --> 00:43:35,920
Speaker 1: So Scott talk to us about these brands you have

891
00:43:36,000 --> 00:43:39,440
Speaker 1: Lee and Wrangler and the rest of the brands you're managing.

892
00:43:39,719 --> 00:43:42,080
Speaker 13: So so, Wrangler have been around since nineteen oh four.

893
00:43:42,160 --> 00:43:44,319
Speaker 13: Lee has been around for over one hundred years. Both

894
00:43:44,360 --> 00:43:47,759
Speaker 13: brands global brands, both brands strong in China, Europe, North

895
00:43:47,800 --> 00:43:49,960
Speaker 13: America of course, and then we have a few other

896
00:43:50,000 --> 00:43:52,319
Speaker 13: brands that are prominent for us, like All Terrain Gear

897
00:43:52,680 --> 00:43:55,320
Speaker 13: and also Rock and Republic denim. So we have a

898
00:43:55,400 --> 00:43:58,480
Speaker 13: nice portfolio, but the predominant piece of our portfolio is

899
00:43:58,640 --> 00:43:59,799
Speaker 13: both Wrangler and Lee.

900
00:44:00,000 --> 00:44:03,280
Speaker 4: So you're expanding out to China and other areas in Asia.

901
00:44:03,360 --> 00:44:04,160
Speaker 4: Tell us more about that.

902
00:44:04,280 --> 00:44:07,320
Speaker 13: Yeah, So we've done some really nice licensing deals around Asia,

903
00:44:07,480 --> 00:44:09,879
Speaker 13: and then we have a direct business in China which

904
00:44:09,920 --> 00:44:12,040
Speaker 13: is fairly significant, so it's a big part.

905
00:44:11,920 --> 00:44:14,040
Speaker 10: Of our portfolio. It's mostly Lee with a.

906
00:44:13,960 --> 00:44:16,839
Speaker 13: Little bit of Wrangler, but we have been there over

907
00:44:16,920 --> 00:44:19,279
Speaker 13: thirty years, so we have a real strong consumer base

908
00:44:19,320 --> 00:44:20,680
Speaker 13: there that know our product really well.

909
00:44:21,320 --> 00:44:23,800
Speaker 1: So what's going on over there for your business?

910
00:44:23,840 --> 00:44:25,719
Speaker 10: You know, it's opened back up, thank god.

911
00:44:25,840 --> 00:44:27,799
Speaker 13: Right, So, we went through a period like everybody did,

912
00:44:27,800 --> 00:44:30,000
Speaker 13: where China was closed and a lot of retail was closed,

913
00:44:30,000 --> 00:44:31,640
Speaker 13: and it's opened back up here recently.

914
00:44:31,680 --> 00:44:34,399
Speaker 10: So for us, it's been how do you so you.

915
00:44:33,840 --> 00:44:35,920
Speaker 1: Do you license your you said early? Do you license

916
00:44:36,000 --> 00:44:37,960
Speaker 1: or do you manufacture and export?

917
00:44:38,200 --> 00:44:41,840
Speaker 13: We license our brand to some parts of Asia, but

918
00:44:41,880 --> 00:44:43,960
Speaker 13: we actually own our operations in China.

919
00:44:44,120 --> 00:44:46,239
Speaker 10: Okay, and we make our product. You know, in China

920
00:44:46,239 --> 00:44:47,200
Speaker 10: face we're comfortable with that.

921
00:44:47,400 --> 00:44:48,640
Speaker 1: He you gotta be less comfortable you were of a

922
00:44:48,640 --> 00:44:49,200
Speaker 1: few years ago.

923
00:44:49,360 --> 00:44:51,839
Speaker 13: Right now everything's okay, okay, So for us right now

924
00:44:51,920 --> 00:44:53,160
Speaker 13: is everything's just fine.

925
00:44:53,560 --> 00:44:54,200
Speaker 10: And what does this.

926
00:44:54,200 --> 00:44:58,600
Speaker 4: Tell us about the consumer more broadly? Not just obviously

927
00:44:58,800 --> 00:45:00,720
Speaker 4: we're not talking about just the US nsumer here. Obviously,

928
00:45:00,719 --> 00:45:02,319
Speaker 4: when you're looking at these other markets, what is it

929
00:45:02,320 --> 00:45:03,720
Speaker 4: telling us about the global economy?

930
00:45:03,760 --> 00:45:05,919
Speaker 13: You know, the global economy I think is treading water

931
00:45:06,000 --> 00:45:07,680
Speaker 13: right now. You know, you saw some of the news

932
00:45:07,680 --> 00:45:10,279
Speaker 13: here out of Europe. Not recently China has opened back

933
00:45:10,360 --> 00:45:12,319
Speaker 13: up so a little bit stronger, and I think here

934
00:45:12,320 --> 00:45:15,080
Speaker 13: in the US, the consumer is it's tough for the

935
00:45:15,080 --> 00:45:17,839
Speaker 13: consumer right now. Right all they're borrowing is a little

936
00:45:17,840 --> 00:45:20,319
Speaker 13: bit more expensive than it has been, so that takes

937
00:45:20,360 --> 00:45:21,800
Speaker 13: a little bit out of a family's budget.

938
00:45:23,680 --> 00:45:27,399
Speaker 1: So the for your you do most of your manufacturing,

939
00:45:27,480 --> 00:45:28,840
Speaker 1: right you don't contract that out.

940
00:45:28,680 --> 00:45:30,120
Speaker 10: About thirty five to forty percent.

941
00:45:30,160 --> 00:45:33,280
Speaker 13: We own our manufacturing in Mexico and then the rest

942
00:45:33,360 --> 00:45:34,720
Speaker 13: is outsourced throughout the globe.

943
00:45:34,719 --> 00:45:36,319
Speaker 1: And how's that versus your competitors.

944
00:45:37,040 --> 00:45:39,560
Speaker 13: We're really the only ones and while we're you know,

945
00:45:39,600 --> 00:45:41,239
Speaker 13: we've owned those for so long. We think of it

946
00:45:41,280 --> 00:45:44,360
Speaker 13: as a competitive advantage. It's speed to market, it's innovation,

947
00:45:44,560 --> 00:45:46,759
Speaker 13: so we can control our own destiny. It's been a

948
00:45:46,760 --> 00:45:49,160
Speaker 13: really good deal for us. And think about the time

949
00:45:49,320 --> 00:45:52,400
Speaker 13: during the pandemic. Owning our own manufacturing during the pandemic

950
00:45:52,480 --> 00:45:53,440
Speaker 13: was clearly a positive.

951
00:45:53,600 --> 00:45:55,840
Speaker 4: So having that competitive advantage there.

952
00:45:55,760 --> 00:45:58,399
Speaker 13: Oh absolutely, I mean we were keeping our factories open,

953
00:45:58,440 --> 00:46:01,120
Speaker 13: we were rolling product in the whole time, So really

954
00:46:01,160 --> 00:46:01,760
Speaker 13: good position.

955
00:46:01,840 --> 00:46:06,719
Speaker 1: All right, what's the just generic market share? Wrangler, Lee, Levi's,

956
00:46:06,840 --> 00:46:08,120
Speaker 1: and maybe other I don't know how many.

957
00:46:08,160 --> 00:46:12,360
Speaker 13: Yeah, so Wranglers two, Lee is three, and and Levi's

958
00:46:12,360 --> 00:46:12,960
Speaker 13: is number one.

959
00:46:13,080 --> 00:46:16,279
Speaker 1: Okay, yeah, interesting, Okay, So what's the growth for I mean,

960
00:46:16,320 --> 00:46:18,160
Speaker 1: these are brands, as you said, around more than one

961
00:46:18,200 --> 00:46:20,880
Speaker 1: hundred years. How do you grow your brands? How do

962
00:46:20,960 --> 00:46:22,520
Speaker 1: you how does how does somebody do that?

963
00:46:22,560 --> 00:46:25,680
Speaker 13: In the stand it's new categories, new channels, new geographies,

964
00:46:25,680 --> 00:46:27,000
Speaker 13: and that's kind of what we've been doing.

965
00:46:27,280 --> 00:46:28,840
Speaker 10: So excuse me.

966
00:46:28,920 --> 00:46:30,759
Speaker 13: When we spun off from VF, we were kind of

967
00:46:30,840 --> 00:46:32,920
Speaker 13: landlocked in a couple of categories and channels because they

968
00:46:33,000 --> 00:46:35,319
Speaker 13: used us for a cash cow standpoint, And now we've

969
00:46:35,360 --> 00:46:38,360
Speaker 13: opened that up to across the globe, different channels and categories.

970
00:46:38,440 --> 00:46:40,759
Speaker 13: So we're selling the high end boutiques, you know, we're

971
00:46:40,800 --> 00:46:43,239
Speaker 13: selling to the Western group, we're selling in China. So

972
00:46:43,280 --> 00:46:45,839
Speaker 13: we're doing things like that and also creating new opportunities

973
00:46:45,880 --> 00:46:47,440
Speaker 13: like our outdoor line altering gear.

974
00:46:47,520 --> 00:46:49,680
Speaker 4: Who do you consider to be some of your rivals?

975
00:46:50,160 --> 00:46:52,480
Speaker 13: Oh, Levi's would be a rival of ours, But I

976
00:46:52,520 --> 00:46:55,600
Speaker 13: consider anybody that sells denim and or apparel arrival.

977
00:46:56,120 --> 00:47:00,799
Speaker 1: So, I mean, you know, I was on wallsterer for

978
00:47:00,800 --> 00:47:02,719
Speaker 1: thirty years. We're in a suit now this is a

979
00:47:02,840 --> 00:47:05,320
Speaker 1: you know, kind of a dress update for me having khakis.

980
00:47:05,560 --> 00:47:09,000
Speaker 1: How's the world changed in God's very academic changed for

981
00:47:09,040 --> 00:47:09,840
Speaker 1: you guys helping.

982
00:47:09,640 --> 00:47:10,000
Speaker 10: Me out out.

983
00:47:10,000 --> 00:47:12,200
Speaker 13: So the world has gotten extremely casual. And if you

984
00:47:12,200 --> 00:47:14,279
Speaker 13: see me today in a blazer and a pair of

985
00:47:14,560 --> 00:47:17,760
Speaker 13: pair of jeens, it's become the standard, you know, for everybody,

986
00:47:17,840 --> 00:47:19,839
Speaker 13: and it's allowed everywhere you go. You can wear this

987
00:47:19,880 --> 00:47:21,719
Speaker 13: to weddings, you can wear this to parties, you can

988
00:47:21,719 --> 00:47:23,640
Speaker 13: wear this to the theater. Didn't used to be able

989
00:47:23,680 --> 00:47:25,799
Speaker 13: to do it, but now it is totally acceptable.

990
00:47:26,520 --> 00:47:29,799
Speaker 4: As far as looking more ahead, what is your outlook

991
00:47:29,920 --> 00:47:32,120
Speaker 4: moving forward? For the company this year.

992
00:47:32,680 --> 00:47:34,920
Speaker 13: I think that we get through this little you know,

993
00:47:35,040 --> 00:47:37,319
Speaker 13: shock with the consumer right now. I think things will

994
00:47:37,320 --> 00:47:40,200
Speaker 13: get better with time. Interest rates will come down over time,

995
00:47:40,239 --> 00:47:42,359
Speaker 13: the consumer will be in a better place, and then

996
00:47:42,400 --> 00:47:44,799
Speaker 13: we'll continue to go ahead and do what we've been

997
00:47:44,800 --> 00:47:47,399
Speaker 13: doing as far as working through a very difficult time,

998
00:47:47,440 --> 00:47:48,439
Speaker 13: but in an elegant way.

999
00:47:48,600 --> 00:47:51,759
Speaker 4: From your perspective and how you're viewing things, all of

1000
00:47:51,800 --> 00:47:54,440
Speaker 4: these recession calls with what you're doing with your business.

1001
00:47:54,440 --> 00:47:56,920
Speaker 4: Do you think that's actually likely in the next couple

1002
00:47:56,920 --> 00:47:57,520
Speaker 4: of quarters?

1003
00:47:57,920 --> 00:47:59,480
Speaker 10: Could be? I do worry about it.

1004
00:47:59,520 --> 00:48:01,080
Speaker 13: There's no quest about it. So yeah, I give it

1005
00:48:01,120 --> 00:48:03,279
Speaker 13: a fifty to fifty chance that we could go there.

1006
00:48:03,320 --> 00:48:05,680
Speaker 13: But for us, our product is used for work in

1007
00:48:05,719 --> 00:48:08,080
Speaker 13: a very significant way, and right now, as you know,

1008
00:48:08,160 --> 00:48:11,480
Speaker 13: unemployment is very good, especially in North America. So the

1009
00:48:11,520 --> 00:48:13,799
Speaker 13: consumer uses our product for a workplace. So we sit

1010
00:48:13,840 --> 00:48:16,440
Speaker 13: in a pretty good place and we're very value oriented.

1011
00:48:16,560 --> 00:48:19,000
Speaker 13: You can buy our product at a very reasonable price,

1012
00:48:19,160 --> 00:48:20,680
Speaker 13: and it's a trusted brand.

1013
00:48:22,560 --> 00:48:24,640
Speaker 1: E commerce. How does that work for you? How does

1014
00:48:24,640 --> 00:48:26,840
Speaker 1: that distribution channel work for you?

1015
00:48:26,920 --> 00:48:29,799
Speaker 13: Big opportunity for us because we didn't capitalize on it

1016
00:48:29,920 --> 00:48:31,560
Speaker 13: or spend any time and money on it when we

1017
00:48:31,560 --> 00:48:33,600
Speaker 13: were part of another company. It's been part of our

1018
00:48:33,640 --> 00:48:36,239
Speaker 13: strategic spin off move and we've been investing in it

1019
00:48:36,239 --> 00:48:37,359
Speaker 13: heavily since the day we.

1020
00:48:37,320 --> 00:48:38,799
Speaker 1: Spun When did you spend off?

1021
00:48:38,840 --> 00:48:40,040
Speaker 10: Four years and one month ago?

1022
00:48:40,239 --> 00:48:40,520
Speaker 5: Okay?

1023
00:48:40,560 --> 00:48:41,600
Speaker 1: And why was that?

1024
00:48:42,239 --> 00:48:44,640
Speaker 13: Wasn't part of the portfolio that the parent company wanted.

1025
00:48:44,640 --> 00:48:47,040
Speaker 13: They wanted to focus on outdoor and action sports and

1026
00:48:47,040 --> 00:48:48,840
Speaker 13: we weren't part of that, so we were a logical

1027
00:48:48,840 --> 00:48:49,680
Speaker 13: spin Okay?

1028
00:48:50,560 --> 00:48:52,759
Speaker 4: Is there We always like to talk about these. See

1029
00:48:52,760 --> 00:48:55,200
Speaker 4: with McDonald's it has their fry indicators. One of their

1030
00:48:55,239 --> 00:48:57,080
Speaker 4: last starting reports, they were talking about how not as

1031
00:48:57,120 --> 00:49:00,000
Speaker 4: many people were adding that on to their meals planned.

1032
00:49:00,080 --> 00:49:02,080
Speaker 4: I'm curious when it comes to denim, are there particular

1033
00:49:02,120 --> 00:49:04,239
Speaker 4: indicators like you like to look at that can give

1034
00:49:04,239 --> 00:49:04,960
Speaker 4: you a tell?

1035
00:49:04,960 --> 00:49:05,239
Speaker 7: We do.

1036
00:49:05,360 --> 00:49:08,520
Speaker 13: We love to look at share data, So NPD share

1037
00:49:08,600 --> 00:49:11,640
Speaker 13: data for us is extremely important. Most of our retailers

1038
00:49:12,320 --> 00:49:15,480
Speaker 13: are aligned and also are part of that process, so

1039
00:49:15,520 --> 00:49:18,600
Speaker 13: we find out exactly what's rang through the register and

1040
00:49:18,680 --> 00:49:20,840
Speaker 13: that is really important to us. In our share for

1041
00:49:20,880 --> 00:49:23,200
Speaker 13: both brands has been growing significantly.

1042
00:49:22,680 --> 00:49:25,080
Speaker 4: Interesting, Okay, So that would be an optimistic sign.

1043
00:49:24,920 --> 00:49:27,719
Speaker 13: Right, very optimistic for us. Yes, and it's real data.

1044
00:49:27,760 --> 00:49:28,520
Speaker 13: It's hard data.

1045
00:49:28,840 --> 00:49:31,200
Speaker 1: Fourteen thou four hundred employees is what we have for you.

1046
00:49:31,239 --> 00:49:31,520
Speaker 7: Guys.

1047
00:49:31,840 --> 00:49:33,399
Speaker 1: Talk to us about the labor market for you. How

1048
00:49:33,440 --> 00:49:36,440
Speaker 1: tough is it? How because we've heard from every CEO

1049
00:49:36,480 --> 00:49:38,239
Speaker 1: and every line of business over the last several years,

1050
00:49:38,360 --> 00:49:39,840
Speaker 1: really tough to get and keep good people.

1051
00:49:39,920 --> 00:49:42,239
Speaker 13: Yeah, it's tough in certain areas. So it's tough in

1052
00:49:42,440 --> 00:49:45,080
Speaker 13: our retail environment, in our stores, it's tough in distribution,

1053
00:49:45,480 --> 00:49:47,960
Speaker 13: it's tough in it So there are pockets that are

1054
00:49:47,960 --> 00:49:51,279
Speaker 13: tougher than others. But remember Warren Greensboro, North Carolina, one

1055
00:49:51,280 --> 00:49:53,440
Speaker 13: of the biggest publicly traded companies. We've been there for

1056
00:49:53,480 --> 00:49:56,040
Speaker 13: one hundred years. We have a very loyal base, and

1057
00:49:56,080 --> 00:49:58,279
Speaker 13: we're a very good proposition for people that want to

1058
00:49:58,320 --> 00:50:00,000
Speaker 13: work for a publicly traded big company.

1059
00:50:00,040 --> 00:50:02,440
Speaker 10: But in Greensboro, right, and what.

1060
00:50:02,400 --> 00:50:03,200
Speaker 1: Are the alternatives?

1061
00:50:03,280 --> 00:50:05,520
Speaker 10: I mean there aren't. There aren't nearly as many as

1062
00:50:05,520 --> 00:50:06,360
Speaker 10: some other large cities.

1063
00:50:06,400 --> 00:50:06,480
Speaker 7: Ye.

1064
00:50:06,560 --> 00:50:09,480
Speaker 1: All right, So you know you're sitting front of a

1065
00:50:09,520 --> 00:50:11,560
Speaker 1: group of investors. What's the number one question you get

1066
00:50:11,560 --> 00:50:12,080
Speaker 1: these days?

1067
00:50:12,400 --> 00:50:14,479
Speaker 13: Mostly about whether we're going to go ahead and pop

1068
00:50:14,520 --> 00:50:17,440
Speaker 13: into a recession or how are things going in China.

1069
00:50:17,640 --> 00:50:19,399
Speaker 13: That's an example of two of the most recent ones.

1070
00:50:19,480 --> 00:50:21,160
Speaker 1: How do you keep a pulse on China? Really?

1071
00:50:21,239 --> 00:50:21,359
Speaker 6: Oh?

1072
00:50:21,360 --> 00:50:23,680
Speaker 13: We have We have a sourcing office in Hong Kong,

1073
00:50:23,719 --> 00:50:25,680
Speaker 13: and we have a front end office marketing, sales and

1074
00:50:25,760 --> 00:50:28,920
Speaker 13: design in Shanghai. We have a leaders there, we have

1075
00:50:28,960 --> 00:50:32,280
Speaker 13: a general manager. They report right into US, and we

1076
00:50:32,480 --> 00:50:34,799
Speaker 13: travel and move back and forth with people. Were there

1077
00:50:34,840 --> 00:50:36,120
Speaker 13: a lot and they come here a lot?

1078
00:50:36,560 --> 00:50:37,960
Speaker 1: And Chinese like their denim.

1079
00:50:38,160 --> 00:50:40,839
Speaker 13: Oh love it, absolutely love it. And it's and it's

1080
00:50:40,840 --> 00:50:41,920
Speaker 13: a big marketplace too.

1081
00:50:42,000 --> 00:50:44,000
Speaker 1: Oh yeah, it is a big I mean. And are

1082
00:50:44,040 --> 00:50:45,439
Speaker 1: the local competitors there?

1083
00:50:45,600 --> 00:50:45,759
Speaker 6: Oh?

1084
00:50:45,800 --> 00:50:46,320
Speaker 10: Absolutely?

1085
00:50:46,400 --> 00:50:49,759
Speaker 13: Yeah, yeah, local and also global, right, because everybody's in.

1086
00:50:49,760 --> 00:50:53,120
Speaker 4: The market, right, So not just Texas with the wranglers, Paul, No.

1087
00:50:53,040 --> 00:50:57,400
Speaker 1: I guess that's how watch that Yellowstone. Yes, all those

1088
00:50:57,440 --> 00:50:58,560
Speaker 1: guys are wearing the ranguage.

1089
00:50:58,719 --> 00:50:59,839
Speaker 10: Huge win for us.

1090
00:51:00,160 --> 00:51:02,960
Speaker 13: Yeah, number one rated show on cable TV. Most of

1091
00:51:03,000 --> 00:51:05,560
Speaker 13: the characters are wearing our product. But also the show

1092
00:51:05,640 --> 00:51:08,560
Speaker 13: is centered around rodeos and the cowboy culture. Our brand

1093
00:51:08,640 --> 00:51:11,000
Speaker 13: is in all those rodeo venues. You see our signs.

1094
00:51:11,040 --> 00:51:13,960
Speaker 13: We've gotten advertising that way. But the single biggest win

1095
00:51:14,040 --> 00:51:15,840
Speaker 13: for us is if you follow the show, you know

1096
00:51:15,920 --> 00:51:19,200
Speaker 13: Landy Wilson's or country artists on there. Well, we just

1097
00:51:19,239 --> 00:51:22,440
Speaker 13: signed her as our global spokesperson for women women Wrangler.

1098
00:51:22,760 --> 00:51:27,720
Speaker 13: Huge wen for our first our first ever global spokesperson.

1099
00:51:27,120 --> 00:51:30,760
Speaker 1: For really Brian a few years ago, and that's talented

1100
00:51:30,800 --> 00:51:32,960
Speaker 1: and got back to the superstars. She's great. Scott Baxter,

1101
00:51:33,040 --> 00:51:36,200
Speaker 1: thank you so much, CEO of Contour brands, Think Wrangler

1102
00:51:36,239 --> 00:51:37,120
Speaker 1: and Lee gens Fro.

1103
00:51:37,360 --> 00:51:40,440
Speaker 5: You're listening to the tape Cat's our live program Bloomberg

1104
00:51:40,480 --> 00:51:44,080
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

1105
00:51:44,160 --> 00:51:46,120
Speaker 5: tune in app, Bloomberg dot Com, and.

1106
00:51:46,080 --> 00:51:47,400
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1107
00:51:47,400 --> 00:51:50,239
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1108
00:51:50,239 --> 00:51:55,240
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

1109
00:51:56,120 --> 00:51:59,440
Speaker 1: Let's continue our C suite conversations today. We're now we're

1110
00:51:59,440 --> 00:52:03,280
Speaker 1: gonna talk about it, the distribution of electronics, huge huge business,

1111
00:52:03,280 --> 00:52:06,239
Speaker 1: Global business. Sean Karens joins us. He's the CEO of

1112
00:52:06,480 --> 00:52:11,520
Speaker 1: Arrow Electronics symbol a r W. The stock is up

1113
00:52:11,719 --> 00:52:13,879
Speaker 1: thirty two percent year to date, up about one point

1114
00:52:14,000 --> 00:52:17,960
Speaker 1: six percent today, all time high for the stock. Sean,

1115
00:52:18,160 --> 00:52:21,560
Speaker 1: thanks so much for joining us. Why is ARW at

1116
00:52:21,560 --> 00:52:22,680
Speaker 1: an all time high today?

1117
00:52:23,760 --> 00:52:25,920
Speaker 14: Well, thank you, Paul, thanks for having me. You know,

1118
00:52:26,000 --> 00:52:29,480
Speaker 14: i'd say that the long term outlook for electronics is

1119
00:52:29,600 --> 00:52:32,960
Speaker 14: very promising. You know, not long ago, the use cases

1120
00:52:32,960 --> 00:52:36,000
Speaker 14: for electronics were pretty narrow. It was things like compute,

1121
00:52:36,560 --> 00:52:40,759
Speaker 14: maybe personal electronics including your smartphone. But today, you know,

1122
00:52:40,800 --> 00:52:43,600
Speaker 14: we talk about the electrification of everything, and so you're

1123
00:52:43,640 --> 00:52:48,640
Speaker 14: seeing all walks of life and homes, cars, factories, you

1124
00:52:48,719 --> 00:52:51,720
Speaker 14: name it. They're all becoming electrified and they all require

1125
00:52:52,040 --> 00:52:55,279
Speaker 14: more and more semiconductor and electronic technology.

1126
00:52:55,480 --> 00:52:59,000
Speaker 4: So we like that Sean talk to us more about

1127
00:52:59,080 --> 00:53:02,600
Speaker 4: what aero electronics does in your global reach.

1128
00:53:04,200 --> 00:53:07,000
Speaker 14: So, Jess, we live in the middle of the electronics

1129
00:53:07,000 --> 00:53:10,480
Speaker 14: and the information technology supply chain, which basically means we

1130
00:53:10,520 --> 00:53:13,400
Speaker 14: help the makers of all those technologies get to market,

1131
00:53:13,480 --> 00:53:19,880
Speaker 14: and then we help the commercial customers of those technologies design, build, supply,

1132
00:53:20,680 --> 00:53:23,719
Speaker 14: and even manage the products that embed them. You know,

1133
00:53:23,760 --> 00:53:25,319
Speaker 14: we like to say it Aro that if it takes

1134
00:53:25,320 --> 00:53:28,840
Speaker 14: an electronic charge, we probably had something to do with

1135
00:53:29,400 --> 00:53:31,920
Speaker 14: designing it, provisioning it, getting it to market.

1136
00:53:33,160 --> 00:53:35,520
Speaker 1: So you know, whenever we talk to folks in a

1137
00:53:35,680 --> 00:53:38,640
Speaker 1: technology supply chain, we have to just ask about the

1138
00:53:38,719 --> 00:53:41,319
Speaker 1: chip business, where are we Are we back to quote

1139
00:53:41,400 --> 00:53:43,600
Speaker 1: unquote normal in terms of the supply and demand of

1140
00:53:43,680 --> 00:53:44,319
Speaker 1: chips out there.

1141
00:53:45,440 --> 00:53:48,840
Speaker 14: You know, I'd say, Paul, the lead times are improving,

1142
00:53:49,360 --> 00:53:52,520
Speaker 14: but we're certainly not back to pre pandemic levels. The

1143
00:53:52,600 --> 00:53:55,759
Speaker 14: improvement has been fairly broad based, but there's still a

1144
00:53:55,840 --> 00:54:00,600
Speaker 14: handful of categories that are in shorter supply in lies.

1145
00:54:00,680 --> 00:54:03,000
Speaker 14: The you know, the golden screw dynamic that I'm sure

1146
00:54:03,040 --> 00:54:06,560
Speaker 14: you've heard the industry talk about on many occasions.

1147
00:54:06,160 --> 00:54:09,040
Speaker 4: When it comes to the different markets and industries that

1148
00:54:09,160 --> 00:54:13,160
Speaker 4: your company is heavily involved in, which can you talk

1149
00:54:13,200 --> 00:54:16,520
Speaker 4: more specifically if it's a automotive and and D industrials,

1150
00:54:16,560 --> 00:54:19,200
Speaker 4: things like that, and how they're being impacted by the

1151
00:54:19,239 --> 00:54:21,000
Speaker 4: trajectory of the economy.

1152
00:54:22,160 --> 00:54:25,320
Speaker 14: So just I'd say the markets are broadly mixed, and

1153
00:54:25,440 --> 00:54:28,200
Speaker 14: it does vary by region throughout the world, But you know,

1154
00:54:28,280 --> 00:54:32,120
Speaker 14: we compete very heavily in the industrial markets, which means

1155
00:54:32,640 --> 00:54:37,560
Speaker 14: you know, lots of manufacturing. We have significant exposure to

1156
00:54:37,640 --> 00:54:41,280
Speaker 14: the automotive and transportation industries more broadly, and that obviously

1157
00:54:41,360 --> 00:54:44,480
Speaker 14: puts us right in the middle of the transition to

1158
00:54:44,840 --> 00:54:52,480
Speaker 14: electric vehicles. But we also participate in aerospace and defense, medical, compute,

1159
00:54:53,239 --> 00:54:56,000
Speaker 14: and a good handful of others. And i'd say, you know,

1160
00:54:56,040 --> 00:55:00,279
Speaker 14: we're seeing relative strength in industrial and automotive and maybe

1161
00:55:00,280 --> 00:55:03,319
Speaker 14: aerospace and defense. They're faring better at the moment than

1162
00:55:03,360 --> 00:55:07,719
Speaker 14: what we see happening in the world of compute, communications, infrastructure,

1163
00:55:08,120 --> 00:55:10,600
Speaker 14: you know, mobility, and even things related to the Internet

1164
00:55:10,600 --> 00:55:14,040
Speaker 14: of Things. I think those demand trends are temporary. I

1165
00:55:14,040 --> 00:55:16,479
Speaker 14: think again, the long term outlook is going to get better.

1166
00:55:17,360 --> 00:55:20,000
Speaker 1: So you know, we can't talk to anybody again within

1167
00:55:20,040 --> 00:55:23,200
Speaker 1: the technology stack without talking about AI, because it seems

1168
00:55:23,200 --> 00:55:25,520
Speaker 1: like every company in the world feels like they're a

1169
00:55:25,560 --> 00:55:29,960
Speaker 1: play on AI. But how does artificial intelligence impact you,

1170
00:55:29,960 --> 00:55:32,680
Speaker 1: your business, your outlook, your customers. How do you guys

1171
00:55:32,680 --> 00:55:33,239
Speaker 1: think about that?

1172
00:55:34,320 --> 00:55:37,799
Speaker 14: So, like most companies were paying very close attention to it,

1173
00:55:37,960 --> 00:55:40,880
Speaker 14: I'd say we're in the early days of the hype cycle,

1174
00:55:41,360 --> 00:55:45,120
Speaker 14: as with many other big tech transitions you know, throughout history.

1175
00:55:45,960 --> 00:55:48,840
Speaker 14: But there's no doubt it represents a compelling opportunity for

1176
00:55:48,960 --> 00:55:50,719
Speaker 14: us and for the industry, And so we think about

1177
00:55:50,760 --> 00:55:53,680
Speaker 14: it on two fronts. One is internal because it will

1178
00:55:53,719 --> 00:55:57,000
Speaker 14: certainly help, you know, help us redefine work and workload

1179
00:55:57,080 --> 00:56:00,520
Speaker 14: and streamline a lot of processes that today you know,

1180
00:56:00,880 --> 00:56:05,440
Speaker 14: require lots and lots of effort. But more importantly, I think,

1181
00:56:05,840 --> 00:56:08,480
Speaker 14: you know, as we speak, there's a whole ecosystem developing

1182
00:56:08,520 --> 00:56:12,719
Speaker 14: around AI and generative AI, and so back to you know,

1183
00:56:12,800 --> 00:56:15,279
Speaker 14: our role in the middle of the you know, the

1184
00:56:15,320 --> 00:56:18,160
Speaker 14: electronics and the IT supply chain. We're going to help

1185
00:56:18,160 --> 00:56:21,360
Speaker 14: bring that ecosystem to life and will help the makers

1186
00:56:21,360 --> 00:56:23,759
Speaker 14: of all those related technologies get to market. And so

1187
00:56:24,400 --> 00:56:26,680
Speaker 14: we think it's just one more of the bigger demand

1188
00:56:26,760 --> 00:56:29,279
Speaker 14: trends that you know, make the long term outlook as

1189
00:56:29,320 --> 00:56:30,200
Speaker 14: promising as it is.

1190
00:56:30,920 --> 00:56:34,120
Speaker 4: This bounce back that we've been seeing more broadly in

1191
00:56:34,280 --> 00:56:37,120
Speaker 4: chip stocks this year. Looking at the Philadelphia Semiconductor Index

1192
00:56:37,160 --> 00:56:41,480
Speaker 4: ticker Symbole Socks SOX, that's a paul almost fifty percent.

1193
00:56:41,520 --> 00:56:43,719
Speaker 4: It's a forty six percent year to date after that

1194
00:56:43,800 --> 00:56:48,200
Speaker 4: index lost clover thirty five percent last year. So sean

1195
00:56:48,280 --> 00:56:51,799
Speaker 4: from your view, and obviously given a large part of

1196
00:56:51,840 --> 00:56:55,000
Speaker 4: your business is tied to obviously the design and building

1197
00:56:55,080 --> 00:56:58,480
Speaker 4: of these chips and it comes to the semiconductor sector,

1198
00:56:58,560 --> 00:57:01,320
Speaker 4: what's your tell and you're reading on what this means

1199
00:57:01,320 --> 00:57:03,960
Speaker 4: for the global economy, because if you see ship makers

1200
00:57:03,960 --> 00:57:06,040
Speaker 4: performing well like this, wouldn't that be more of an

1201
00:57:06,040 --> 00:57:06,920
Speaker 4: optimistic sign?

1202
00:57:08,040 --> 00:57:09,919
Speaker 14: You know, I would tend to agree with you. We've

1203
00:57:09,960 --> 00:57:13,000
Speaker 14: been you know, talking amongst ourselves for some time now

1204
00:57:13,000 --> 00:57:15,200
Speaker 14: that we're you know, there's an argument to be made

1205
00:57:15,200 --> 00:57:17,840
Speaker 14: for a softer landing. As you might know, there's a

1206
00:57:17,880 --> 00:57:21,640
Speaker 14: cyclical nature to this industry, and so when demand is strong,

1207
00:57:21,920 --> 00:57:24,360
Speaker 14: you know, supply rants up to serve it, and that

1208
00:57:24,440 --> 00:57:27,480
Speaker 14: all works great until demand softens and that leads to

1209
00:57:28,320 --> 00:57:31,080
Speaker 14: you know, a build up of inventory throughout the industry

1210
00:57:31,120 --> 00:57:32,680
Speaker 14: that takes a little bit of time to sell through.

1211
00:57:33,280 --> 00:57:35,160
Speaker 14: I'd say the industry is right in the middle of

1212
00:57:35,200 --> 00:57:40,040
Speaker 14: that now. However, you know, backlogs are still fairly significant

1213
00:57:40,120 --> 00:57:43,360
Speaker 14: due to all the shortages over the past couple of years,

1214
00:57:43,400 --> 00:57:46,680
Speaker 14: and I'd say demand has softened, but it's not you know,

1215
00:57:46,760 --> 00:57:49,000
Speaker 14: falling sharply. You know, I think we're in the midst

1216
00:57:49,000 --> 00:57:51,960
Speaker 14: of a market that's moving sideways, and hence we sort

1217
00:57:51,960 --> 00:57:54,600
Speaker 14: of feel like, you know, a software landing is in store,

1218
00:57:54,640 --> 00:57:57,640
Speaker 14: and I think, you know, the market is probably reflecting that.

1219
00:57:58,800 --> 00:58:01,000
Speaker 1: So shaw I see aout a third of your revenue

1220
00:58:01,040 --> 00:58:04,200
Speaker 1: comes from Asia, Pacific. I don't know what's your exposure

1221
00:58:04,200 --> 00:58:07,120
Speaker 1: to China, what's your either as a customer or supplier,

1222
00:58:07,160 --> 00:58:08,560
Speaker 1: and how are you guys dealing with that.

1223
00:58:09,840 --> 00:58:13,000
Speaker 14: Well, we serve the Asia Pacific market, of which you know,

1224
00:58:13,120 --> 00:58:16,440
Speaker 14: China is the biggest piece. Like in the West, we

1225
00:58:16,520 --> 00:58:20,920
Speaker 14: tend to focus on the transportation and industrial markets and

1226
00:58:20,960 --> 00:58:24,840
Speaker 14: so you know, demand in China is software at the moment,

1227
00:58:24,960 --> 00:58:27,320
Speaker 14: but you know, we do anticipate that that will improve

1228
00:58:27,360 --> 00:58:28,640
Speaker 14: at some point in the near future.

1229
00:58:30,080 --> 00:58:30,320
Speaker 7: You know.

1230
00:58:30,360 --> 00:58:32,680
Speaker 14: We we like that market, we like our position in

1231
00:58:32,720 --> 00:58:36,080
Speaker 14: that market, and we think that there's still a lot

1232
00:58:36,120 --> 00:58:38,880
Speaker 14: of good opportunity for us in store. Having said that,

1233
00:58:38,920 --> 00:58:42,280
Speaker 14: we're a global company and we have lots of relative

1234
00:58:42,320 --> 00:58:46,400
Speaker 14: strength throughout the West. So regardless of how the you know,

1235
00:58:46,440 --> 00:58:49,920
Speaker 14: the semiconductor industry shakes out, I think we're well positioned

1236
00:58:50,920 --> 00:58:53,200
Speaker 14: regardless of how that how that looks.

1237
00:58:53,360 --> 00:58:56,920
Speaker 4: When we have about twenty seconds left. Other areas in

1238
00:58:56,960 --> 00:59:00,360
Speaker 4: the global economy that you want to push into, well.

1239
00:59:00,240 --> 00:59:03,760
Speaker 14: We certainly like all the trends in transportation and industrial

1240
00:59:03,840 --> 00:59:09,320
Speaker 14: and medical as I mentioned, we certainly see great opportunities

1241
00:59:09,400 --> 00:59:13,920
Speaker 14: in our IT business for the notion of information technology

1242
00:59:13,960 --> 00:59:16,320
Speaker 14: as a service and We're certainly going to play an

1243
00:59:16,320 --> 00:59:19,440
Speaker 14: important role in helping you know, customers benefit from it.

1244
00:59:19,880 --> 00:59:21,640
Speaker 1: All right, Hey, Shan, thanks so much for taking the

1245
00:59:21,680 --> 00:59:23,960
Speaker 1: time to check in with us. Sean Karns, he's the

1246
00:59:24,000 --> 00:59:28,360
Speaker 1: CEO of Arrow Electronics, the New York Stock Exchange. Tickers

1247
00:59:28,440 --> 00:59:31,760
Speaker 1: a RW to put into your Bloomberg terminal, and what

1248
00:59:31,840 --> 00:59:34,520
Speaker 1: you'll find when you put up the prices stocks an

1249
00:59:34,640 --> 00:59:38,080
Speaker 1: all time Hi, so participating in that tech move.

1250
00:59:40,040 --> 00:59:43,120
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

1251
00:59:43,160 --> 00:59:47,360
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever.

1252
00:59:47,040 --> 00:59:49,720
Speaker 1: Podcast platform you prefer. I'm Matt Miller.

1253
00:59:49,960 --> 00:59:52,880
Speaker 2: I'm on Twitter at Matt Miller nineteen seventy three.

1254
00:59:53,360 --> 00:59:55,720
Speaker 1: And I'm Faull Sweeney. I'm on Twitter at pt Sweeney.

1255
00:59:55,840 --> 00:59:58,520
Speaker 1: Before the podcast, you can always catch us worldwide at

1256
00:59:58,520 --> 00:59:59,240
Speaker 1: Bloomberg Radio.