Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
Speaker 1: with my co host of Bonnie Quinn. Every business day
Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
Speaker 1: along with essential market moving news. Kind the Bloomberg Markets
Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
Speaker 1: and on Bloomberg dot com. I'm looking at bitcoin here,
Speaker 1: looking at the chart here. We haven't talked bitcoin in
Speaker 1: a while. I'm looking at the chart and it hit
Speaker 1: a low for this year back around mid March, just
Speaker 1: under five thousand dollars. Uh, look at it today it
Speaker 1: is more than doubled over eleven thousand dollars. So Bitcoin
Speaker 1: just really just rallying here once again. And I kind
Speaker 1: of in line with gold. We talk a lot about gold, um,
Speaker 1: but the bitcoin is just pen an extraordinary story. I'm
Speaker 1: gonna talk about both gold and bitcoin. We can do that,
Speaker 1: of course with one Michael mcglow, Bloomberg Intelligence Commodity strategists.
Speaker 1: So Mike, let's start with bitcoin, because anything I know
Speaker 1: about this commodity, and I admit it's limited, but whatever
Speaker 1: I do, it's from reading your research. What's been going
Speaker 1: on with bitcoin here, Hey, Paul, Well, the key thing
Speaker 1: was ten thousand resistance. It held for quite a while,
Speaker 1: basically almost a year, and market finally blew through that
Speaker 1: last weekend. And I think the key thing was it's
Speaker 1: following gold. And also there was notice from the o
Speaker 1: c C, the Officer of the Controller of the currency,
Speaker 1: that they're gonna allow banks to custody bitcoin. So bitcoins
Speaker 1: finally reached that hurdle. And bitcoin is a tendency to
Speaker 1: stagnate and and just drive people crazy forhil and then
Speaker 1: jump for big moves. So the next target I really
Speaker 1: see for bitcoin right now, it's around eleven thousand. I
Speaker 1: see it really is around four team thousands, which was
Speaker 1: last year's high. Interesting, all right, so how do you
Speaker 1: view I know you were the first one to introduced
Speaker 1: me to this concept as bitcoin, uh, similar to goal
Speaker 1: in a store of value. How's your thinking on that
Speaker 1: these days? The bottom line is the simple way to
Speaker 1: look at bitcoin is this supply is declining by code
Speaker 1: is going to be less than two percent next year
Speaker 1: and and go to near one percent in the next
Speaker 1: hundred years. And that's a big difference with gold. Gold
Speaker 1: is historically been around two percent, but prices go higher,
Speaker 1: more supply come on. Bigcoin won't do that. So the
Speaker 1: key thing matters is demand and adoption. Yes, it's a
Speaker 1: new technology, but all my indicators are for more adoption
Speaker 1: and more demand, and this little news last week from
Speaker 1: the occ really kind of picks it up. So that's
Speaker 1: at the bottom line. Remember, it's digital currency, and there's
Speaker 1: more demand for it and limit supply, and people are
Speaker 1: adopting it. Talk to me about that supply, so you
Speaker 1: can just explain that a little bit more to me
Speaker 1: and our listeners. Why there would not be more supply.
Speaker 1: Why can't I just go get a computer and create
Speaker 1: some more supply. Well that's the thing. Um. The total
Speaker 1: amount of bitcoins ever mind will be twenty one million.
Speaker 1: We're almost nineteen million mind already. So now why why
Speaker 1: is that? Where did that twenty one million number come from?
Speaker 1: It was it was set up by code, by our
Speaker 1: famous person, so Tosi Documoto. I think you might like
Speaker 1: that name, but um, you might respond to that one
Speaker 1: a little bit. But that was set up by code
Speaker 1: to have limited supply means, so it would be more
Speaker 1: of a store value. To me. I view it as
Speaker 1: a collectible, and that's why it's becoming. So that's never
Speaker 1: gonna go much above there. And it doesn't matter who
Speaker 1: minds are, how many people mind. There's no more than
Speaker 1: nine bitcoins created a day. Last year was eight d
Speaker 1: and that's it. That's all they can be created so
Speaker 1: via code unless something breaks down with something I can't predict,
Speaker 1: it's going that way. And again it's digital money. It's new,
Speaker 1: it's a new Internet money as people might call it,
Speaker 1: but supplies limited and demands picking up. Interesting. All right,
Speaker 1: let's go back to kind of older store of money,
Speaker 1: and that is gold. We briefly saw a touch two
Speaker 1: thousand dollars announced here. What are the drivers behind the
Speaker 1: moving gold? Mic um? I think we all kind of
Speaker 1: know the big picture ones. The bottom line is free money.
Speaker 1: It was a cover of Economist magazine just a week ago.
Speaker 1: And that is a concept that we can print as
Speaker 1: much money as we want, to create as much liquidity
Speaker 1: as we want by essential banks, and have as much
Speaker 1: fiscal stimus as we want, yet not have higher bondial
Speaker 1: And that to me is just a double bullmarket for
Speaker 1: you know, big big foreign foundation for gold to go
Speaker 1: higher when you don't have competition from higher yields. Gold
Speaker 1: must appreciate, and that's what it's doing right now. It's
Speaker 1: getting a little expensive around two thousand. I look at
Speaker 1: a little more technically now above the fifty week average
Speaker 1: is the most of the decade, so you want to
Speaker 1: lay low a little bit. But fundamentally it's quite bullish.
Speaker 1: And until we see something to limit people's ability to
Speaker 1: print money, which by human nature of the petitions will
Speaker 1: continue to do, golds to continue appreciate. And you know,
Speaker 1: I'm just looking at the chart of silver. There there's
Speaker 1: another commodity that from that same mid March period has
Speaker 1: effectively doubled. It is now the best performing commodity on
Speaker 1: the planet this year. Up about the thing is it's
Speaker 1: only really catching up to gold. Its cup around twenty
Speaker 1: five dollars is was really good. Resistance is the key
Speaker 1: thing to remember about silver. Well, I'll perform gold in
Speaker 1: a week dour environment, which you're getting a little bit
Speaker 1: right now, but you need a strong economy. Demand for
Speaker 1: silver is from industrial purposes, and right now that's probably
Speaker 1: not likely. So um I view silver is pretty much
Speaker 1: locked up in their good distance, probably not gonna get
Speaker 1: them up much above thirty. But gold can easily get
Speaker 1: to three thousand briefly in the next thirty seconds or so. Mike,
Speaker 1: what's the other commodity that maybe we're not focusing on
Speaker 1: and that we should be all precious metals pladium and platinum.
Speaker 1: To me, it's all precious medals, the top performers on
Speaker 1: the year, and I expect them to continue anything less
Speaker 1: like on the agricultural or front or I mean my favorite,
Speaker 1: you know, my favorite pork bellies, um, anything in the
Speaker 1: egg front. I'm just gonna be doing my outlook. And
Speaker 1: the problem with agg is just too much supplied. Weather
Speaker 1: is good, too much corn, and there's just not enough
Speaker 1: demand for it, most notally from slack demand for ethanal. Well,
Speaker 1: we need China to come in and buy, right. Is
Speaker 1: that does that move the market? Still? They're helping keep
Speaker 1: it a floor into the market, But the bottom line
Speaker 1: is there's just so much corn on the market. Because's
Speaker 1: so much corn coming, weather is good, that will keep
Speaker 1: a limit in prices. Appreciate so much, Mike McGlone, We
Speaker 1: really appreciate that commodity update. Mikes, commodity strategist for Bloomberg Intelligence,
Speaker 1: again giving us his thoughts on the just a commods
Speaker 1: have just had a great, great run. Here again you
Speaker 1: look up, pull up the chart for silver, for gold
Speaker 1: and as micro was saying, precious medals in general, and
Speaker 1: you to see uh, you know, this doubling off the
Speaker 1: March low ands and then some and then that includes
Speaker 1: bitcoin again more of a double in price off of
Speaker 1: the March lows. So again with these low UH interest
Speaker 1: rate environments, weaker dollars starting to see the commodities really
Speaker 1: trade well, although not so much on the agricultural fronts.
Speaker 1: Michael was just saying, just a supply and the demand
Speaker 1: story just not there for UH commodity agg prices right here,
Speaker 1: even if with China coming back into the market, well
Speaker 1: as more and more businesses try to reopen and raises
Speaker 1: the question if employees get sick with COVID nineteen when
Speaker 1: they return to work, are employers liable. To try to
Speaker 1: get the answer to that question, we welcome Ronnie has
Speaker 1: said Home, managing partner of the said Home Law group. Ronnie,
Speaker 1: thanks so much for joining us here. How does this
Speaker 1: play out? Are the employers loyal liable? What's the law currently?
Speaker 1: Thank you for having me, you know, I'm going to
Speaker 1: give you the answer that lawyers what to say, and
Speaker 1: that is, it depends yes, and it depends upon what
Speaker 1: measures the employer is taking in order to maintain a
Speaker 1: safe working environment. And as you know, it depends on
Speaker 1: which state you're in. The governors are providing employers with
Speaker 1: what they perceive as best practices. So let's take in
Speaker 1: New York, for example, one thing that Governor Cuomo tells
Speaker 1: us to do is take everybody's temperature every day recorded.
Speaker 1: If someone has a fever of two degrees or fahrenheit
Speaker 1: or higher, send them home, make them take the COVID
Speaker 1: nineteen tests, have themselves quarantine. If they just positive, they
Speaker 1: just negative, they can come back to work. And then
Speaker 1: you're supposed to ask a series of questions related to
Speaker 1: travel and interacting with individuals in general who may have
Speaker 1: exposure to the virus. It also includes make workplaces sanitary
Speaker 1: and maintaining social distance while working, and all of that
Speaker 1: is fine. The employer can only do so much. If
Speaker 1: I provide my employees with a questionnaire and they answer truthfully,
Speaker 1: that's fine. But I don't know if they're going to
Speaker 1: answer truthfully because I don't know what they're doing when
Speaker 1: they go home. I don't know what they're doing over
Speaker 1: the weekend, and I think it's there where the employer
Speaker 1: will not be liable due to someone else's fib Yeah,
Speaker 1: so it seems to me almost impossible for an employer
Speaker 1: to be held liable assuming they do the basic requirements,
Speaker 1: because you just don't know. You can't prove where I
Speaker 1: would think a person got the viber's that is exactly correct.
Speaker 1: And some people that I know personally have told me
Speaker 1: that they did test positive for the virus and they
Speaker 1: were effectively home most of this entire time since March
Speaker 1: h mid March, at least a New York City. They're
Speaker 1: all in New York City and they stay at home,
Speaker 1: and somehow they um to catch the virus. So you're right,
Speaker 1: it is impossible. And we're all still waiting for this,
Speaker 1: you know. I guess it's the fourth stimulus now for
Speaker 1: COVID nineteen from the government. But part of what everyone
Speaker 1: is discussing is a waiver of liability for employers because
Speaker 1: there's a there's a tug of war right now between
Speaker 1: coming back to work and refusing to come back to work,
Speaker 1: and some employers, uh, it's really impossible for them to
Speaker 1: function with percent workforce working remotely. So do you think
Speaker 1: that that virus relief proposal, where there is some liability
Speaker 1: protection from businesses and schools, is that is that a
Speaker 1: reasonable thing to have in federal legislation or can the
Speaker 1: courts kind of take care of it on its own?
Speaker 1: You know, it's uh, it's to me it's six of one,
Speaker 1: half dozen, dozen of another. A law is only as
Speaker 1: good as the individuals who follow it. So again, I
Speaker 1: think asking questions seems reasonable on the surface, but everybody
Speaker 1: knows their employees and they know who is going to
Speaker 1: give them a straight answer and who is not, and
Speaker 1: it's impossible to police it. I think as long as
Speaker 1: the employer is taking some kind of reasonable measure in
Speaker 1: terms of social distancing, cleanliness, things of that nature, then
Speaker 1: the employer should not be held liable. But if you
Speaker 1: walked into your office and there are a hundred people
Speaker 1: in an open architecture environment with no not even cubicles
Speaker 1: and no division and no space, that's that's that's a
Speaker 1: completely different issue. Do we have any precedent from a
Speaker 1: legal perspective about you know, employer liability for just having
Speaker 1: a I guess a clean workplace or one that's that's
Speaker 1: that's conducive to health, or one that certainly doesn't is
Speaker 1: not conducive to spreading disease. Generally speaking, I'm not an
Speaker 1: expert in this area, but we do have ocean laws
Speaker 1: occupational safety and health, and there's both federal and state legislation.
Speaker 1: Its normal is looked at from the perspective of manual labor,
Speaker 1: making sure individuals, for example, who are on a construction
Speaker 1: site have proper retires so if God forbid, something falls
Speaker 1: on their foot, they have steel toe shoes and they
Speaker 1: won't lose a toe. Um, but that those ocean laws
Speaker 1: do extend in general to health and safety, and so
Speaker 1: those laws have not changed. They're still in place. If anything,
Speaker 1: the c d C and the e E o C
Speaker 1: have joined on the ocean bandwagon and now we have
Speaker 1: specific COVID NINETEAM guideline do business. I wonder, you know,
Speaker 1: it's just the liability of the uncertainty of the liability.
Speaker 1: I wonder if that will you know, maybe prod certain
Speaker 1: employers to say, you know what, you can work from home.
Speaker 1: You know, I mean, if you heard any of that
Speaker 1: that that type of concern coming from employers and until
Speaker 1: there is a vaccine I'm not sure I want the
Speaker 1: liability of people coming back into my office. Yes, I
Speaker 1: have several clients and we've had that exact conversation, and
Speaker 1: you know, the advice there is really simple. You as
Speaker 1: a business owner need to do what you think is
Speaker 1: best for your business and your employees, and the employees
Speaker 1: also should play a role in that decision. So, and
Speaker 1: it also depends upon what it is you're doing, and again,
Speaker 1: how people are seated. So I'm the managing member of
Speaker 1: my law firm, but every one of my attorneys has
Speaker 1: their own office. Nobody shares offices because I know that
Speaker 1: I get distracted easily, and therefore I like to give
Speaker 1: everyone their own personal space. So for us, it's there's
Speaker 1: less danger right of coming to the office. But depending
Speaker 1: on how your office is designed, it may be perfectly
Speaker 1: reasonable for you to tell people to continue to work
Speaker 1: from home. But as you can imagine, there are some
Speaker 1: jobs which makes it almost impossible for people. Yeah, it's interesting.
Speaker 1: We had Google, I guess just announced today that you know,
Speaker 1: or yesterday, Uh, their folks can stay home till the
Speaker 1: end of the calendar year. So um really making Yeah,
Speaker 1: so that a lot of those opening open space architecture.
Speaker 1: But about the folks that are you don't have a choice,
Speaker 1: you're work in a paltry plan or you work in
Speaker 1: a meat fact, we've already seen issues there. Did those
Speaker 1: folks have rights? I mean, they do have rights to
Speaker 1: the extent that they have a valid reason to not
Speaker 1: come to the office because maybe they have an underlying
Speaker 1: health condition which makes it more unsafe for them than
Speaker 1: the average individual. They have rights. Uh. They also if
Speaker 1: they have other issues, for example, perhaps they live with
Speaker 1: someone with a compromised immune system, they have rights there too.
Speaker 1: There are emergency you know, sick time relief for those individuals,
Speaker 1: but there's a cap on how much they'll earn, and
Speaker 1: it may not be enough for some people to live
Speaker 1: off of because in some instances, I think the federal
Speaker 1: cap is two hundred dollars per day. So if you're
Speaker 1: executive and you're earning a hundred and fifty thousand a year,
Speaker 1: that's a pretty steep pay cut for you. It may
Speaker 1: not be sustainable. But for the individual working, yes, inside
Speaker 1: some kind of plant, perhaps that is in for them. Interesting.
Speaker 1: I think if we can have shifts, right, I think
Speaker 1: everyone is just so entrenched in nine five or eight
Speaker 1: to four or whatever. Everyone, I'm gonna have to have
Speaker 1: to call it there because we're just out of time.
Speaker 1: But thanks so much for joining us. Ronnie I set
Speaker 1: Home Managing Partners, set Home Law Group joining us about
Speaker 1: those back to work and protections for employers. Well, we
Speaker 1: have the FED meeting today tomorrow, the FED decision at
Speaker 1: two p m. Wall Street time tomorrow. To get a
Speaker 1: preview of what we might hear from the Fed, we
Speaker 1: welcome our favorite FED guests, Ira Jersey, chief US interest
Speaker 1: rate strategist for Bloomberg Intelligence. So, Ira, I'm guessing you're
Speaker 1: not expecting anything major to come out of the FED meeting,
Speaker 1: but give us your thoughts. Yeah, thanks, Paul. It's all
Speaker 1: going to be nuanced, I think. And you know, the
Speaker 1: big thing that we're gonna be looking for is what
Speaker 1: is the Federal Reserve thinking in terms of forward guidance,
Speaker 1: because they, you know, they hinted basically early in the
Speaker 1: crisis that they might try yield curve control, which is
Speaker 1: buying bonds at a certain yield in unlimited size to
Speaker 1: keep the long term interest rates low. But they kind
Speaker 1: of backtracked on that over the last six weeks or so,
Speaker 1: and in doing so. They they did say that they
Speaker 1: were looking for some kind of other enhanced forward guidance.
Speaker 1: So you know how that's going to work, how long
Speaker 1: that guidance is going to be for basically saying that
Speaker 1: we're gonna keep interest rates at zero for you know,
Speaker 1: at least three years now, but maybe it's a little longer. Um.
Speaker 1: You know that that's the type of guidance we're going
Speaker 1: to be looking for in in both the statement and
Speaker 1: more importantly in the press conference that starts at two
Speaker 1: thirty tomorrow. Right. So, I the Fed received some pushback
Speaker 1: I think on their plans over the last month or
Speaker 1: so to you know, go into the bond market start
Speaker 1: buying maybe even corporate bonds, buying even Apple bonds on
Speaker 1: their list. What actually has the Fed been doing in
Speaker 1: the open market. Yeah, so they have been buying corporate bonds,
Speaker 1: but in very small size I mean relative to the
Speaker 1: size of the market as well as the hum as
Speaker 1: well as how much is being issued in new issuance.
Speaker 1: But you know, basically they're doing it just a fulfill
Speaker 1: a promise that they made when the Cares Act was
Speaker 1: was first passed and Congress basically gave them the ability
Speaker 1: to do that with UH some money from the Treasury
Speaker 1: Department and taxpayer money UH in the event that they
Speaker 1: take any losses um. But but they're still buying a
Speaker 1: lot of treasury bonds and agency agency mortgage debt and
Speaker 1: that is likely to continue, especially given the size of
Speaker 1: the deficit and and a little bit of worry that
Speaker 1: the FED has. I think that the that the bond
Speaker 1: market might seize up at different times, especially if the
Speaker 1: especially in periods when they're issuing so much debt. So
Speaker 1: you know, we're we're talking about having a four and
Speaker 1: a half trillion dollar deficit for fiscal year which ends
Speaker 1: at the end of September UM and and you know,
Speaker 1: additional stimulus is only to push out how big deficits
Speaker 1: are going to be into. So so I think that
Speaker 1: the FED is worried about market liquidity and they will
Speaker 1: continue to buy corporate bonds and that means that you know,
Speaker 1: their balance sheet are just going to keep expanding at
Speaker 1: least for the time being. Do you expect tomorrow and
Speaker 1: his prepared to marks end or in a Q and
Speaker 1: A for FED Chairman pal To a Pine that more
Speaker 1: fiscal stimulus is needed. Is that what is his role
Speaker 1: in his commentary on that front. Yeah, so I think
Speaker 1: he he will mention that. I mean, he hinted at
Speaker 1: it in uh in the past. Actually, in at the
Speaker 1: June meeting, he basically said that you know, there is
Speaker 1: a there. It's he didn't come out and say it
Speaker 1: directly that there's a limit to monetary policy because I
Speaker 1: think that that they're scared that how the markets might
Speaker 1: react and how the economy economic actors might react if
Speaker 1: the Fed says that they don't have much more that
Speaker 1: they can do. But in reality that with the exception
Speaker 1: of increasing sizes, there's not a whole lot more that
Speaker 1: the Federal Reserve can do. So he will not and
Speaker 1: say that, you know, more school stimulus is needed. This
Speaker 1: is unprecedented times. The economy is still fragile. You've seen
Speaker 1: an uptick now in uh in in on insurance claims
Speaker 1: over the last couple of weeks. So I think that
Speaker 1: he'll point to some economic indicators to suggest that there
Speaker 1: should be additional stimulus, and then of course a reporter
Speaker 1: will ask him what should that stimulus include, and he'll
Speaker 1: just say that's not up to me to decide, that's
Speaker 1: up to Congress, and um, but you know, it should
Speaker 1: be broad and help all the economic actors across the economy. Right,
Speaker 1: what do you expect the ira UM in terms of
Speaker 1: what else the FED can do? I mean it seems
Speaker 1: like they've I mean, as as you look back on
Speaker 1: these past five six months, the FED was early, the
Speaker 1: FED was active, The Fed was I think transparent. The
Speaker 1: FED generally gets good remarks. I think for most market
Speaker 1: participants is its steady issue goes right here and it
Speaker 1: kind of the the balance point is gonna be fiscal stimulus. Yeah,
Speaker 1: So I think I think for the FED it's more
Speaker 1: you know, right sizing the tools that they currently have.
Speaker 1: So in the sense, for example, that there is another UM,
Speaker 1: the significant downturn in the economy, and that it becomes
Speaker 1: more difficult, for example, for credit to flow through UM,
Speaker 1: you know, changing things like the main Street program perhaps
Speaker 1: and and doing some tweaks into who's eligible to that.
Speaker 1: They've done a little bit of that. UM certainly helping
Speaker 1: the municipal bond market and and municipalities fund themselves given
Speaker 1: the lack of tax revenue is something else that I
Speaker 1: think can be tweaked a little bit here and there.
Speaker 1: But there's UM. But but it's probably more about the
Speaker 1: size that they might need to do in the future
Speaker 1: as opposed to creating a lot of new programs. Any
Speaker 1: surprises you're expecting in the Q and A tomorrow, what
Speaker 1: what would surprise you? I think what would surprise me
Speaker 1: is is is if they did announce some type of
Speaker 1: yield curve control or extent really enhanced forward guidance that
Speaker 1: was beyond the two time frame that they're currently talking about.
Speaker 1: That would certainly be a surprise to the market. Um.
Speaker 1: You know, what would the market reaction be? Well, with
Speaker 1: ten year yields at fIF the eight basis point here? Um,
Speaker 1: you know, it maybe goes back to the lows at
Speaker 1: fifty four or fifty fifty basis points perhaps, but um,
Speaker 1: but I don't see a significant market reaction even if
Speaker 1: they were to enhance that guidance tomorrow. IRA, thanks so much,
Speaker 1: as always, our Jersey chief US interest rate strategist for
Speaker 1: Bloomberg Intelligence. We'll be watching the FED today and tomorrow again. UH.
Speaker 1: Statement at two pm Wall Street time tomorrow, UH, And
Speaker 1: as I ever mentioned, the press conference with FED Chairman
Speaker 1: pal to thirty pm Wall Street time tomorrow, Bloomberg will
Speaker 1: be covering that clearly will bring that all the important
Speaker 1: information coming from that meeting, as we always do. Well,
Speaker 1: we had some numbers Adam McDonald's really weak same store
Speaker 1: sales that' stock trading off today. We've got Starbucks tomorrow.
Speaker 1: Good opportunity to get a sense at how restaurants are
Speaker 1: dealing in this pandemic right here as we enter into
Speaker 1: the fifth or six month here, so the way to
Speaker 1: really get close to the restaurant business. We're pleased to
Speaker 1: be able to chat with Michael Halen. He covers Stronts
Speaker 1: for Bluemberg Intelligence. He's a senior analysts there. Mike, let's
Speaker 1: start with Mickey D's. Uh, what was your takeaway from
Speaker 1: the numbers today? Uh? You know, Mickey D's kind of
Speaker 1: underperformed a little bit early on in the pandemic. I
Speaker 1: think part of that was the fact that they've they've
Speaker 1: halted their all day breakfast to kind of help um
Speaker 1: improve franchising market margins and throughput at the drive through
Speaker 1: during lunch and dinner times. But they've been able to
Speaker 1: increase their same store sales in July. Uh, they outperformed
Speaker 1: the QUSR competitors of theirs. Uh in May and June,
Speaker 1: which we knew were going to be weak anyway, So
Speaker 1: so it looks like, um, when it comes to sales,
Speaker 1: they're back, uh in in in a mode of kind
Speaker 1: of taking uh market share again here in the US,
Speaker 1: which which we've been kind of accustomed to over the
Speaker 1: last three years. Same source sales came in brutally low.
Speaker 1: I think it's twenty point nine percent negative. Uh was
Speaker 1: is that? Was that more than the street I've been
Speaker 1: looking for? Worse than the street had been looking for. Yeah,
Speaker 1: it was slightly worse. Results were kind of mixed. It
Speaker 1: was slightly worse. US was was uh you know, only
Speaker 1: maybe thirty basis points worse than than what was the
Speaker 1: street was expecting. You know that headline total same store
Speaker 1: sales number was was greatly impacted by uh international store closures. Um.
Speaker 1: You know some markets were shut down completely, you know, France,
Speaker 1: uh UK, Spain, Italy. Those were four markets that were
Speaker 1: completely closed for for part of the quarter. And McDonald's
Speaker 1: does the right thing by including store closures in their
Speaker 1: same store sales estimate. So some of the restaurant peers
Speaker 1: were going to see reporting the numbers might look a
Speaker 1: little better, but that's because they leave closed stores out
Speaker 1: of the compace. So so so I think you know
Speaker 1: all told you know, what you see out of McDonald's
Speaker 1: is that you know, they're recovering. They're recovering a little
Speaker 1: faster than many of their peers because of a strong
Speaker 1: drive through business, uh, you know, and sales as sales
Speaker 1: are getting back to growth, you know, margins however, a
Speaker 1: little bit of a different story. So top line, you know,
Speaker 1: I was appreciate the forecast for McDonald's because it truly
Speaker 1: is a global forecast. What are they seeing in some
Speaker 1: of the markets going forward? Are they what's their level
Speaker 1: of optimism were concerned? I think there's a lot more
Speaker 1: optimism here in the US, and that's because they have
Speaker 1: a very strong drive through business. About two thirds of
Speaker 1: their sales comes through the drive through prior to COVID,
Speaker 1: and now obviously those numbers are higher. Delivery has seen
Speaker 1: some growth, and then although even though they only have
Speaker 1: two thousand dining rooms open, the fact that they're able
Speaker 1: to generate positive seams our sales uh is a good sign. Uh.
Speaker 1: International a little bit different. So those four markets that
Speaker 1: I mentioned in Europe that had been closed down, they
Speaker 1: do maybe thirty percent of their sales at the drive through. So, um,
Speaker 1: that's going to be a big headwind. China also seems
Speaker 1: to be consumers seem to be continue to be scared
Speaker 1: of UH coronavirus and it's affecting their consumption behavior. There's
Speaker 1: very few drive throughs in that country. So so they
Speaker 1: also pointed out that China they expect UH sluggish sales
Speaker 1: to continue through year end. Starbucks reports tomorrow. What's your
Speaker 1: expectation like, Yeah, so Starbucks has a you know, much
Speaker 1: bigger issues than McDonald's and I think it's gonna take
Speaker 1: a lot longer for their sales to recover. So, uh,
Speaker 1: first of all, on the sales side, don't they have
Speaker 1: only about of their U S stores have a drive through,
Speaker 1: So that's problematic. Also, breakfast sales have been hurt hit
Speaker 1: the hardest in the QSR industry because of increased telecommuting,
Speaker 1: less people going to work. Um, so that's obviously going
Speaker 1: to be very impactful for Starbucks. And they do a
Speaker 1: big business and there has a lot of people in
Speaker 1: the store, and you have consumers that still aren't ready
Speaker 1: to get back to you know, packed cafes. So all
Speaker 1: for all of those reasons, we expect sales to be
Speaker 1: down much much more in the quarter, maybe down about
Speaker 1: for Starbucks. And then they also have much more margin
Speaker 1: pressure because they um own and operate about fifty percent
Speaker 1: of their stores, whereas you know McDonald's is about six percent,
Speaker 1: So they're gonna have much higher pressure on the margin
Speaker 1: side as well as Starbucks. So it's interesting just kind
Speaker 1: of looking at your peer group. In the peer group
Speaker 1: for Starbucks, I mean, if you're an indoor dining facility,
Speaker 1: your stocks just obviously kind of gotten hit pretty hard
Speaker 1: year to day. But if you're you know, kind of
Speaker 1: out of home a little bit, Domino's at Chipotle, that's
Speaker 1: been the play for restaurants and is that kind of
Speaker 1: the foreseeable future the call Mike, Yeah, we think that's
Speaker 1: going to continue. I mean, some of these full service
Speaker 1: dining chains are starting to do better because I think
Speaker 1: a there was stimulus checks right, there was increased payment
Speaker 1: in the unemployment. People definitely had a lot of cabin fever.
Speaker 1: People were tired of staying home and wanted to get out. Uh,
Speaker 1: And they're kind of making picking up some of the
Speaker 1: slack with outdoor dining. Um, but with a lot of
Speaker 1: you know, with this unemployment, insurance uncertainty. UH. You know,
Speaker 1: as we move into the fall in the winter and
Speaker 1: outdoor dining goes away in many of the states in
Speaker 1: the United States, you know, we expect there to be
Speaker 1: continued pressure on a full service UH sector. And and
Speaker 1: you know, right now delivery continues to be the place
Speaker 1: to be with with drive through as a close second. Interesting,
Speaker 1: interesting times in the restaurant business, initially one of the
Speaker 1: hardest hit sectors, still filling the pain. Michael Halen, senior
Speaker 1: restaurant analysts for Bloomberg Opinion, giving us his thoughts here.
Speaker 1: I could just say, for you know, here in New Jersey,
Speaker 1: we have the outdoor dining and that's generally going pretty well.
Speaker 1: I think a lot of the restaurants I talked to
Speaker 1: say it helps, but it certainly is not the cure
Speaker 1: all and of course that only works when the weather cooperates,
Speaker 1: so clearly rest runs looking for some help there. Thanks
Speaker 1: for listening to Bloomberg Markets podcast. You can subscribe and
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Speaker 1: you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn,
Speaker 1: and I'm Paul Sweeney. I'm on Twitter at pt Sweeney.
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