WEBVTT - Macy’s Delays Earnings After Worker Hid Millions in Expenses 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.360 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.680 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebeck from Bloomberg Radio. 0:00:27.160 --> 0:00:29.240 Now, let's get to one company that I gotta say. 0:00:29.280 --> 0:00:31.240 Tim was already on track to be the news this week. 0:00:31.240 --> 0:00:33.160 We knew that, yeah, but for good stuff. 0:00:33.240 --> 0:00:35.640 Yeah, we're talking about Macy's. It's usually a big week 0:00:35.680 --> 0:00:38.320 for Macon's ahead of their Thanksgiving Day parade and Black Friday. 0:00:38.320 --> 0:00:40.960 It kicks off the all important holiday shopping season for 0:00:41.080 --> 0:00:43.760 it and the rest of the nation's retailers. Yet it's 0:00:43.840 --> 0:00:45.920 kind of been a rough start to it all. Macy 0:00:45.960 --> 0:00:48.559 said it would delay its third quarter earnings release after 0:00:48.600 --> 0:00:51.240 an investigation revealed an employee hit more than one hundred 0:00:51.560 --> 0:00:55.040 million dollars of expenses. Macy's shares down about two point 0:00:55.120 --> 0:00:58.520 six percent as we speak, with some insight into really 0:00:58.520 --> 0:01:00.560 what the heck is going on? We got Bloomberg Television's 0:01:00.560 --> 0:01:02.920 remained bostic here in our studio. He's the cost of 0:01:02.960 --> 0:01:04.640 the clothes coming up in a little less than an 0:01:04.640 --> 0:01:07.360 hour on a Bloomberg TV. So you spoke with the 0:01:07.360 --> 0:01:09.600 folks over at Macy's today, what's going on here? 0:01:09.720 --> 0:01:11.640 I did, and unfortunately I can't really tell you what's 0:01:11.640 --> 0:01:13.720 going on because there was only so much they would share. 0:01:13.800 --> 0:01:15.120 I mean, this is a pretty big deal. 0:01:15.160 --> 0:01:15.280 Now. 0:01:15.319 --> 0:01:18.039 Obviously in terms of the actual dollar amount, this is 0:01:18.120 --> 0:01:20.640 a drop in the bucket when you consider their overall revenue. 0:01:20.640 --> 0:01:24.560 But you're talking about an employee who was effectively in 0:01:24.640 --> 0:01:27.920 charge of certain things when it came to their delivery operations. 0:01:28.240 --> 0:01:30.319 One hundred and thirty to roughly one hundred and fifty 0:01:30.319 --> 0:01:34.240 four million dollars over a three year period, apparently unaccounted for. Now. 0:01:34.240 --> 0:01:37.800 I asked macy specifically, was this money stolen? Was this 0:01:37.959 --> 0:01:41.280 just expenses that were miscategorized? They could not say. They 0:01:41.280 --> 0:01:43.680 said that the investigation is still in the early stage, 0:01:44.000 --> 0:01:47.680 and they weren't able to actually share publicly exactly what happened, 0:01:47.720 --> 0:01:49.600 other than to say that the employee is no longer there. 0:01:49.640 --> 0:01:50.800 I mean, I don't want to read too much and 0:01:50.840 --> 0:01:52.320 do it right, because we've got to get more details 0:01:52.360 --> 0:01:53.760 and we want to be careful here. But it does 0:01:53.800 --> 0:01:55.920 make you wonder about like oversight or something, or what 0:01:57.280 --> 0:01:57.840 was going on. 0:01:57.920 --> 0:02:00.640 Well, that's the big question because they're basically this on 0:02:00.640 --> 0:02:04.160 one single employee. Now, you know, not to be too 0:02:04.200 --> 0:02:07.120 clib about it, but you know, you know, one employee 0:02:07.120 --> 0:02:09.520 making off with a few thousand dollars sounds plausible. One 0:02:09.520 --> 0:02:14.120 employee potentially making off or at least obscuring over one 0:02:14.160 --> 0:02:16.840 hundred million dollars, that's a lot for one person. I mean, 0:02:16.880 --> 0:02:18.560 I know there are a lot of overachievers out there, 0:02:18.600 --> 0:02:20.480 but I think I would need a little bit of help. 0:02:20.720 --> 0:02:22.399 But they but they said right now that they think 0:02:22.440 --> 0:02:24.000 that this has been nipped in the blood. They did 0:02:24.000 --> 0:02:26.920 make it clear that this actually came about while they 0:02:26.919 --> 0:02:30.240 were preparing their earnings report, and they just noticed some 0:02:30.280 --> 0:02:32.400 discrepancies and then they did a deeper dive, and then 0:02:32.400 --> 0:02:34.520 they made the decision that it was better to hold 0:02:34.520 --> 0:02:37.640 off on issuing that report until they got a fuller 0:02:37.639 --> 0:02:39.240 investigation of what was happening. 0:02:39.560 --> 0:02:42.000 But this is also a time when Macy's is trying 0:02:42.080 --> 0:02:44.200 to do a huge turnaround right now. Yeah, got a 0:02:44.240 --> 0:02:47.079 relatively new CEO, someone you've spoken with quite a bit 0:02:47.400 --> 0:02:51.080 over the last few months. Explain the backdrop that this 0:02:51.160 --> 0:02:52.400 is happening against well. 0:02:52.440 --> 0:02:55.800 The backdrop is basically a slowdown in sales growth for 0:02:55.880 --> 0:02:59.160 the company overall, Macy's Inc. That's the large umbrella company. 0:02:59.160 --> 0:03:03.040 Of course. The major properties are Macy's the store, Bloomingdale's 0:03:03.080 --> 0:03:06.600 the store, and Blue Mercury, which focuses on cosmetics. Blue 0:03:06.639 --> 0:03:09.560 Mercury is doing great. Yeah, Bloomingdale's, believe it or not, 0:03:09.880 --> 0:03:13.440 is doing great. Macy's stores themselves not so great on 0:03:13.480 --> 0:03:15.799 a comp sales basis. They were down three percent. That's 0:03:15.840 --> 0:03:19.520 just that the Macy's branded stores, but that drags down 0:03:19.880 --> 0:03:22.720 the ink the umbrella. Comp sales down as a whole 0:03:23.040 --> 0:03:26.320 also lower. Of course, the company will focus on Bloomingdale's. 0:03:26.520 --> 0:03:28.959 The current CEO of Macy's Inc. Tony Spring, used to 0:03:29.000 --> 0:03:31.880 run Bloomingdale's, so there's a big reason why he became 0:03:31.919 --> 0:03:33.560 CEO of the overall company because he did a lot 0:03:33.560 --> 0:03:35.720 to turn that around. And Blue Mercury is doing better 0:03:35.760 --> 0:03:37.600 as well, as a lot of people are still willing 0:03:37.640 --> 0:03:39.400 to buy cosmetics and skincare. 0:03:39.240 --> 0:03:41.720 Guilty as charged, but no, like listen, whether it's a 0:03:41.800 --> 0:03:44.120 four or right or all of those, they've really done well. 0:03:44.120 --> 0:03:47.280 But I feel like blooming Dale's is different from Macy's 0:03:47.280 --> 0:03:48.920 in terms of their customer in a big way. And 0:03:48.960 --> 0:03:51.160 I do wonder whether you know Tony Spring, you know, 0:03:51.640 --> 0:03:53.720 can make those adjustments. 0:03:53.760 --> 0:03:55.240 Well, that's a big part of the problem. And I've 0:03:55.240 --> 0:03:56.960 asked in this in past calls. Now they wouldn't want. 0:03:57.000 --> 0:03:58.960 They didn't want to talk about this today. They're saying 0:03:58.960 --> 0:04:01.760 that when they released their earnings, which they say will 0:04:01.760 --> 0:04:04.640 be done well, they said by December eleventh, so it 0:04:04.680 --> 0:04:06.200 could come before that, but they expect to have the 0:04:06.240 --> 0:04:09.320 earnings release and the conference called by December eleventh. But 0:04:09.360 --> 0:04:13.280 to your point, Bloomingdale's had much more of a I 0:04:13.320 --> 0:04:15.680 guess niche customer if you will. It was much more 0:04:15.720 --> 0:04:18.760 definable than Macy's. Macy's was kind of everything to all people, 0:04:19.040 --> 0:04:20.919 and as you know, that's the big challenge for department 0:04:20.920 --> 0:04:23.359 stores right now is how do you beat everything to 0:04:23.440 --> 0:04:25.880 all people in a world where I think a lot 0:04:25.920 --> 0:04:28.600 of shoppers want something that's a little bit more personalized, 0:04:28.600 --> 0:04:30.800 a little bit more niche. And I think Tony Spring 0:04:30.839 --> 0:04:32.960 did a good job with that with Bloomingdale's, but he 0:04:33.000 --> 0:04:34.680 was dealing with the customer base that was kind of 0:04:34.720 --> 0:04:35.200 right for them. 0:04:35.200 --> 0:04:37.440 How much digital are they doing over on the Macy's side. 0:04:37.480 --> 0:04:38.480 Is that productive for that. 0:04:38.680 --> 0:04:40.800 I think the last quarter they said roughly it's still 0:04:40.839 --> 0:04:43.040 it's sort of tracking around the thirty percent range. So 0:04:43.160 --> 0:04:46.640 that varies pretty wildly depending on which brand you're talking about. Again, 0:04:46.680 --> 0:04:51.240 it's doing relatively well for Bloomingdale's, relatively well for Blue Mercury. 0:04:51.560 --> 0:04:53.479 Macy's is still kind of that nut that they have 0:04:53.600 --> 0:04:56.360 to crack. And they have tried something, and I want 0:04:56.360 --> 0:04:58.360 to point out they had this thing they called these 0:04:58.360 --> 0:05:00.760 are smaller stores, called the First Fifth that Donny Spring 0:05:00.800 --> 0:05:04.159 set up said, let's do smaller concepts. We don't necessarily 0:05:04.200 --> 0:05:07.160 need these gigantic you know, tens of thousands of square feet, 0:05:07.200 --> 0:05:09.080 hundreds of thousands square feet at some of these stores. 0:05:09.160 --> 0:05:11.880 We need smaller versions of these that will do better. 0:05:12.160 --> 0:05:15.400 They identified fifty stores that they did that, and if 0:05:15.400 --> 0:05:17.880 you break out just those fifty stores away from the 0:05:17.920 --> 0:05:21.839 other Macy's, they're actually doing pretty well. Three consecutive quarters 0:05:21.839 --> 0:05:24.040 of COMM sales growth. In the most recent quarter it 0:05:24.080 --> 0:05:26.839 was up two percent, so down on Macy's as a whole, 0:05:27.040 --> 0:05:29.800 but those first fifty macy stores and when they've redesigned 0:05:29.880 --> 0:05:32.000 the smaller format up almost two percent. 0:05:32.080 --> 0:05:34.240 Okay, so in this case, smaller could be better. We'll 0:05:34.240 --> 0:05:35.880 have to wait and see maybe a few more quarters 0:05:35.880 --> 0:05:37.000 to make that determination. 0:05:37.400 --> 0:05:39.720 Sport coat you're wearing about ue, where'd you get that from? 0:05:39.760 --> 0:05:41.080 Thank you? I don't actually know. 0:05:41.080 --> 0:05:42.920 Okay, this might be a j crew about of Macy's 0:05:43.160 --> 0:05:43.760 ling tales. 0:05:44.880 --> 0:05:50.360 But I asked the question, guys shares. 0:05:50.040 --> 0:05:51.920 Down as much as five percent earlier in the Yeah, 0:05:52.160 --> 0:05:53.719 down a little more than two percent. Right now, What 0:05:53.760 --> 0:05:55.760 do you think it is that analysts are reacting to here? 0:05:56.000 --> 0:05:58.440 I think it's just a one off charge here. Well, 0:05:58.440 --> 0:05:59.920 but there's a million dollars one hundred million. 0:05:59.920 --> 0:06:02.000 But there's also the issue of how deep does it go? 0:06:02.200 --> 0:06:02.400 Right? 0:06:02.480 --> 0:06:03.840 And what else did they miss right? 0:06:03.839 --> 0:06:07.200 Any potential something like this big question is if there's smoke, 0:06:07.320 --> 0:06:10.160 is there a fire? Now? Again, the company line right now, 0:06:10.240 --> 0:06:11.960 both both of what they told me on the call 0:06:12.279 --> 0:06:14.600 as well as in the press release, is that this 0:06:14.640 --> 0:06:17.760 is an isolated incident and that it has been contained. 0:06:17.800 --> 0:06:19.760 But they could not give me any details right now, 0:06:20.720 --> 0:06:22.719 reassuring me of that, and they said they will have 0:06:22.760 --> 0:06:23.880 more deals another criminals. 0:06:24.000 --> 0:06:26.360 We don't know how like, we don't know, so all 0:06:26.440 --> 0:06:28.720 right for someone like you who knows this company. Well, 0:06:28.720 --> 0:06:30.280 I just got about thirty seconds left here. I mean, 0:06:30.320 --> 0:06:32.560 the worst case scenario would be what the best case 0:06:32.600 --> 0:06:33.200 scenario is? 0:06:33.240 --> 0:06:33.360 What? 0:06:33.640 --> 0:06:35.880 Well, the best case scenario it is just one hundred 0:06:35.880 --> 0:06:37.640 million dollars, as they said, one hundred and fifty four 0:06:37.680 --> 0:06:39.240 million dollars as they say. When you look at their 0:06:39.240 --> 0:06:41.680 total expenses that they were logging, that was four point 0:06:41.760 --> 0:06:44.600 six billion dollars. So a small fraction of what their 0:06:44.600 --> 0:06:48.000 expenses were. That's the upside. Now the potential downside. If 0:06:48.040 --> 0:06:50.520 there's more to this, or this was more widespread, then 0:06:50.600 --> 0:06:51.800 that potentially becomes an issue. 0:06:51.839 --> 0:06:53.520 All right, So next vocal points when we finally get 0:06:53.560 --> 0:06:54.279 their earnings. 0:06:54.000 --> 0:06:55.560 Right, yeah, hopefully before December. 0:06:55.680 --> 0:06:58.280 A black right when you're shopping because you want that 0:06:58.320 --> 0:06:59.080 coat that Tim's got. 0:06:59.120 --> 0:07:00.760 I had some nice coate. I know, I know, I'm 0:07:00.800 --> 0:07:01.279 just saying. 0:07:02.760 --> 0:07:04.800 Great stuff. As always. Romain bost At, co host of 0:07:04.800 --> 0:07:06.400 The Clothes on Bloomberg TV. It's coming your way at 0:07:06.400 --> 0:07:07.680 the top of the hour, so be sure to check 0:07:07.680 --> 0:07:08.000 it out. 0:07:08.839 --> 0:07:12.360 You're listening to the Bloomberg Business Week podcast. Catch us 0:07:12.400 --> 0:07:15.640 live weekday afternoons from two to five pm Eastern Listen 0:07:15.680 --> 0:07:17.840 on Apple car Play and the brout Auto with a 0:07:17.840 --> 0:07:21.520 Bloomberg Business app or watch us live on YouTube. 0:07:22.360 --> 0:07:24.440 I'm just looking at treasuries right now. To your note, 0:07:24.600 --> 0:07:27.680 We've seen yields definitely back off now four twenty seven 0:07:27.720 --> 0:07:29.440 on that two year note, and I'm looking at a 0:07:29.480 --> 0:07:33.080 tenure at four twenty six. Talk about a flattening, certainly 0:07:33.080 --> 0:07:35.760 of the curve that we've seen. I want to talk 0:07:35.840 --> 0:07:38.840 a little bit more about the treasury trade. We mentioned 0:07:38.840 --> 0:07:41.960 this earlier. We have seen treasuries added to some of 0:07:41.960 --> 0:07:44.840 the gains from that late Friday announcement of Scott Besson, 0:07:45.000 --> 0:07:47.560 a Wall Street veteran who investors expect will take this 0:07:47.600 --> 0:07:50.800 thing out of the administration's more aggressive trade and economic 0:07:50.840 --> 0:07:54.400 policy proposals. Of course, he was nominated to be presidentle 0:07:54.400 --> 0:07:56.640 like Donald Trump's Treasury secretary choice. 0:07:56.760 --> 0:07:59.120 With some thoughts on that in the market outlook post election. 0:07:59.240 --> 0:08:01.080 We go now to Aaron kenn And he's co founder 0:08:01.080 --> 0:08:04.360 and CEO over at Clear Harbor Asset Management. They've got 0:08:04.400 --> 0:08:06.760 about one hundred one point five billion dollars in assets 0:08:06.800 --> 0:08:10.240 under management. Aaron joining us once again from Stanford, Connecticut. Aaron, 0:08:10.280 --> 0:08:12.320 good to have you back with us. We haven't spoken 0:08:12.360 --> 0:08:15.520 to you since the election result earlier this month. I'm 0:08:15.560 --> 0:08:19.560 just wondering, big picture, how your views have shifted now 0:08:19.560 --> 0:08:21.160 that we know who is going to be the next 0:08:21.240 --> 0:08:24.160 president and the more we're learning about the president elect's 0:08:24.200 --> 0:08:25.120 cabinet choices. 0:08:26.200 --> 0:08:29.000 Yeah, thanks for having me back, Tam and Carroll. It 0:08:29.080 --> 0:08:30.160 certainly has been interesting. 0:08:30.160 --> 0:08:32.520 We started to see these trends just before the election, 0:08:32.720 --> 0:08:36.920 as the markets, the betting markets that is, priced in 0:08:37.320 --> 0:08:40.640 or starting to price in a Trump victory. But certainly 0:08:40.679 --> 0:08:43.560 on the equity side we've seen much more of a 0:08:43.600 --> 0:08:46.880 convergence of performance. So not just the MAC seven, not 0:08:47.000 --> 0:08:51.920 just the tech sector, not just the communications sector, but 0:08:52.040 --> 0:08:57.840 rather financials and industrials and utilities and in other areas 0:08:57.840 --> 0:08:59.760 of the markets such as energy and materials. 0:09:00.080 --> 0:09:01.480 So I think that's one. 0:09:01.360 --> 0:09:05.760 Theme that may actually continue into twenty and twenty five. 0:09:05.800 --> 0:09:07.400 And then you mentioned interest rates. 0:09:07.400 --> 0:09:10.599 I mean, clearly with the selection of Scott Bessett, and 0:09:10.800 --> 0:09:14.280 we've seen rates decline notably today. 0:09:14.800 --> 0:09:15.680 There's a sense that. 0:09:17.640 --> 0:09:21.880 Perhaps the deficit spending concern that the market had regardless 0:09:21.880 --> 0:09:26.240 of who won, frankly, could be quelled on the margin 0:09:26.360 --> 0:09:31.440 because we have someone who is quite experienced at the 0:09:31.520 --> 0:09:34.360 US Treasury, and perhaps will have a little more discipline 0:09:34.360 --> 0:09:37.559 on that front, and so I think there's a sense 0:09:37.600 --> 0:09:42.040 there that it'll allow the FED to worry less about inflation, 0:09:42.280 --> 0:09:45.080 to think a little more about the employment and growth picture, 0:09:45.679 --> 0:09:48.240 and perhaps the lower fifty percent of the economic stratum, 0:09:48.240 --> 0:09:51.400 which has still been under a lot of pressure over 0:09:51.400 --> 0:09:52.400 the last couple of years. 0:09:53.280 --> 0:09:55.120 Erin how do you game this out? I am just 0:09:55.160 --> 0:09:57.160 curious some of the conversations you might be having with 0:09:57.200 --> 0:10:00.640 some of your investors or clients, the money that you 0:10:00.640 --> 0:10:04.760 guys have under management, about what really happens. Right there's 0:10:04.840 --> 0:10:07.840 the campaign, and I think it's fair to say that 0:10:07.880 --> 0:10:10.880 ahead of the outcome that folks came on and said, listen, 0:10:11.200 --> 0:10:12.640 either way, it's going to be good for the markets 0:10:12.679 --> 0:10:15.480 because you have candidates that promise everything right to kind 0:10:15.480 --> 0:10:17.040 of get people to vote on it. But I do 0:10:17.120 --> 0:10:19.280 wonder what the reality is of now that we know 0:10:19.320 --> 0:10:21.480 it will be a second term for Donald Trump and 0:10:21.520 --> 0:10:25.920 his team. What will be the reality of policies that 0:10:26.040 --> 0:10:28.880 ultimately take place. Will it be the extremes that everybody 0:10:29.520 --> 0:10:32.440 is talking about, or will it be more likely know 0:10:32.880 --> 0:10:33.840 or something in the middle. 0:10:35.160 --> 0:10:37.280 I don't want to sound too cute, Carol, but I 0:10:37.280 --> 0:10:40.840 think this is the difference between trading and investing to 0:10:40.880 --> 0:10:44.439 a great extent. There are certain trends that clearly coming 0:10:44.440 --> 0:10:46.880 out of the Trump administration we think on day one 0:10:47.440 --> 0:10:52.000 will impact asset prices across fixed income equities, even private equity. 0:10:52.320 --> 0:10:55.160 So one trend, for example, as we gain this out 0:10:55.200 --> 0:10:58.400 and think about medium and long term trends for our clients, 0:10:59.400 --> 0:11:05.199 is how lower regulatory environment, lesser regulatory impact could could 0:11:05.280 --> 0:11:07.599 potentially provide a tailwind. 0:11:07.080 --> 0:11:08.600 To mergers and acquisitions. 0:11:09.240 --> 0:11:12.320 What does that mean for small cap and mid cap companies, 0:11:12.720 --> 0:11:15.720 But what does it also mean for certain sectors within 0:11:15.760 --> 0:11:17.880 the economy that over the last four or five years 0:11:17.920 --> 0:11:21.000 have underperformed the sort of tech trends or financials or 0:11:21.040 --> 0:11:25.800 even mid cap smaller cap financial companies that are sort 0:11:25.800 --> 0:11:30.560 of consulting within M and A. And also, you know, 0:11:30.559 --> 0:11:32.840 what does it mean for the democratization that we've seen 0:11:32.880 --> 0:11:36.400 of private equity in the growth in that landscape and 0:11:36.800 --> 0:11:41.280 the publicly traded asset managers that are really seeing revenues 0:11:41.320 --> 0:11:45.320 accelerate on the heels of them continuing to attract capital 0:11:45.360 --> 0:11:48.720 frankly from clients at firms like Clear Harbor Asset Management, 0:11:49.400 --> 0:11:54.200 who we believe in some cases may be deserving their 0:11:54.240 --> 0:11:57.240 portfolios and their risk tolerance may require them to have. 0:11:57.160 --> 0:12:00.000 Some of that exposure. So we're thinking very much long term. 0:12:00.320 --> 0:12:03.760 Even artificial intelligence very hot topic, but how is it 0:12:03.800 --> 0:12:08.040 really impacting other segments of the economy outside of technology? 0:12:08.440 --> 0:12:09.480 And so we think about how is. 0:12:09.480 --> 0:12:14.520 It impacting biotechnology and healthcare and maybe the acceleration of 0:12:14.920 --> 0:12:16.960 some of the phase one, two and three work that's 0:12:17.000 --> 0:12:20.199 being done, and you know, sort of molecule research and development, 0:12:20.480 --> 0:12:23.480 and how is it even impacting utilities artificial intelligence in 0:12:23.520 --> 0:12:26.240 the smart grid. So we're trying to think longer term 0:12:26.280 --> 0:12:29.160 about these trends, and we're trying to not make any 0:12:29.240 --> 0:12:31.360 you know, one huge bet as it pertains to this. 0:12:31.760 --> 0:12:32.439 Hey, Eron, I. 0:12:32.360 --> 0:12:35.319 Want to talk a little bit about about doge no, 0:12:35.400 --> 0:12:39.920 not doge coins, that of government efficiency, Elon musk vek Ramaswami. 0:12:40.600 --> 0:12:44.640 They've avowed to cut two trillion dollars in spending from 0:12:44.720 --> 0:12:47.640 the federal budget. We're talking, you know, twenty percent goes 0:12:47.640 --> 0:12:50.559 to social security, eighteen percent to national defense, fifteen percent 0:12:50.600 --> 0:12:54.280 of health, about fourteen percent just goes to interest. Do 0:12:54.280 --> 0:12:56.000 you think they can pull it off? And if they do, 0:12:56.920 --> 0:12:59.920 how do you look at it from an investment perspective. 0:13:00.920 --> 0:13:02.200 Well, in some ways. 0:13:02.240 --> 0:13:04.200 In the long term, I hope they can pull it off, 0:13:04.240 --> 0:13:06.760 because I think we need to get our sort of 0:13:06.760 --> 0:13:11.360 fiscal house in order and start balancing our revenue collection 0:13:12.000 --> 0:13:15.959 with our expenses. And that may require some significant pain 0:13:16.120 --> 0:13:20.400 in certain aspects of society, and that's unfortunate, but we 0:13:20.440 --> 0:13:23.520 do need to bring ourselves back to that north star. 0:13:23.880 --> 0:13:25.480 But you bring up a good point to him, and 0:13:25.520 --> 0:13:28.920 that is to the extent that DOGE is successful. And 0:13:28.960 --> 0:13:32.760 Elon Musk mentioned, well, maybe he could cut two trillion 0:13:32.800 --> 0:13:35.600 dollars out of an annual budget. I don't know if 0:13:35.600 --> 0:13:37.360 he was thinking over a five year period or a 0:13:37.360 --> 0:13:39.760 ten year period, but he seemed to intimate it was one. 0:13:39.920 --> 0:13:43.480 It was over an annualized period. If that's the case, 0:13:43.520 --> 0:13:48.760 which would still not bring ourselves into balance. I think 0:13:48.760 --> 0:13:51.600 we would have to ask ourselves. The GDP trends that 0:13:51.640 --> 0:13:55.160 we've seen over the last several years have heavily been 0:13:55.240 --> 0:13:59.439 impacted by the deficit spending, the unsustainable deficit spending. We've 0:13:59.440 --> 0:14:03.080 all applied GDP, We've always sort of had consternation around 0:14:03.280 --> 0:14:06.240 the deficit spending, but this could be a reverse where 0:14:06.240 --> 0:14:08.720 we have less deficit spending and we have lower GDP. 0:14:08.920 --> 0:14:12.360 Now that the positive silver lining and all this which 0:14:12.360 --> 0:14:14.400 we have to analyze as productivity and whether or not 0:14:14.480 --> 0:14:16.120 we can achieve productivity gains. 0:14:15.880 --> 0:14:19.000 To offset that. But that's something I think investors are. 0:14:18.880 --> 0:14:22.160 Not yet totally sort of grappling with, and to be 0:14:22.200 --> 0:14:25.200 fair to them, it's not clear exactly how this Doge 0:14:25.200 --> 0:14:29.120 process will work. Ultimately, Congress has to decide on some 0:14:29.160 --> 0:14:30.280 of these spending initiatives. 0:14:30.320 --> 0:14:33.840 Are you anticipating the next four years or at least 0:14:33.840 --> 0:14:36.960 a couple of years where markets trade on posts that 0:14:37.000 --> 0:14:38.600 come off of truth social. 0:14:41.040 --> 0:14:42.360 I don't think of it that way. 0:14:42.520 --> 0:14:47.520 I mean, I think there are some very qualified people that. 0:14:49.960 --> 0:14:53.640 Incoming President Trump has selected. There are certainly some people. 0:14:54.120 --> 0:14:55.920 But there were a lot of qualified people the first 0:14:55.920 --> 0:14:57.400 time around, and then yet there was still a lot 0:14:57.400 --> 0:14:58.920 of social media posts. 0:14:59.200 --> 0:15:01.040 That's right, And there's a lot of there's a lot 0:15:01.080 --> 0:15:04.480 of turnover as well, and I think that's that's something. 0:15:04.160 --> 0:15:05.680 That I'm keeping my eye on. 0:15:06.520 --> 0:15:09.480 You know, we have some interesting picks, some are I 0:15:09.480 --> 0:15:13.360 think highly qualified. Will they stick around for a year 0:15:13.440 --> 0:15:16.200 or two or three or four, and that'll that'll I 0:15:16.200 --> 0:15:19.480 think be important to invest sort of ponder. 0:15:19.440 --> 0:15:21.000 Well, So glad we got some time with you. We've 0:15:21.000 --> 0:15:23.040 been wanting to get your view now that the election 0:15:23.160 --> 0:15:26.440 is over. Aaron Kennon, co founder CEO Clear Harbor Asset Management. 0:15:28.480 --> 0:15:32.320 You're listening to the Bloomberg Business Week podcast. Listen live 0:15:32.440 --> 0:15:35.640 each weekday starting at two pm Eastern on applecar Play 0:15:35.640 --> 0:15:38.520 and Android Auto with the Bloomberg Business Ad. You can 0:15:38.520 --> 0:15:41.800 also listen live on Amazon Alexa from our flagship New 0:15:41.840 --> 0:15:46.640 York station Just Say Alexa playing Bloomberg eleven thirty a. 0:15:46.640 --> 0:15:47.880 Bloomberg scoop Today. 0:15:48.000 --> 0:15:51.040 Also most Bread story our colleague Todd Gillespie reporting that 0:15:51.200 --> 0:15:55.920 city is using retention bonuses alongside management changes and tech 0:15:56.000 --> 0:15:59.400 upgrades to remake the banks offering for ultra rich customers. 0:16:00.120 --> 0:16:02.840 Stay. Yeah, so doing more, doing less. 0:16:02.880 --> 0:16:06.640 Trying to keep these employees on by enticing them. And 0:16:06.680 --> 0:16:09.560 also the new or new ish head of Wealth Management 0:16:09.600 --> 0:16:12.160 has been doing a lot of traveling to many parts 0:16:12.200 --> 0:16:13.240 of the world to meet with clients. 0:16:13.280 --> 0:16:14.960 I got to say the Wealth business, right, that's something 0:16:15.000 --> 0:16:17.160 that I feel like whoever we talked to came up 0:16:17.400 --> 0:16:19.640 with the folks over at Schwab on the West Coast. 0:16:19.720 --> 0:16:20.320 I mean right. 0:16:20.400 --> 0:16:23.720 It's the wealth management business just continues to grow. If 0:16:23.760 --> 0:16:26.600 you didn't notice, we are approaching bonus season. Mereth Dennis 0:16:26.640 --> 0:16:28.240 has a great view on how that could look for 0:16:28.320 --> 0:16:31.400 Wall Street. She is managing partner the financial search firm 0:16:31.520 --> 0:16:34.560 Prospect Rock Partners. The company does placement in finance, also 0:16:34.880 --> 0:16:37.760 operations for private equity firms, investment banks, and the like. 0:16:37.880 --> 0:16:41.160 She joins us right here in our Bloomberg Interactive Broker studio. Welcome, Welcome, 0:16:41.160 --> 0:16:44.000 How are you. I'm doing great? Thank you well. Tell 0:16:44.080 --> 0:16:46.480 us about your world and what you are seeing in 0:16:46.560 --> 0:16:50.200 terms of placement demand, who's hiring, what kind of hiring, 0:16:50.240 --> 0:16:50.880 what's going on. 0:16:51.360 --> 0:16:53.200 So there's a lot going on, and a lot has 0:16:53.200 --> 0:16:57.800 happened since the presidential election. I think we're seeing definitely 0:16:57.800 --> 0:17:01.800 an uptick in hiring over the past two weeks. We're 0:17:01.880 --> 0:17:08.760 seeing firms really start to close on their pipeline, and 0:17:08.800 --> 0:17:11.200 as they get the deals across the finish line, there's 0:17:11.400 --> 0:17:14.600 more certainty in terms of fee income. More certainty in 0:17:14.680 --> 0:17:18.600 terms of the income means more money for the bonus 0:17:18.640 --> 0:17:22.919 pool and also more money for deepening that bench. 0:17:23.119 --> 0:17:25.240 So Meredith was just just a case of deals waiting 0:17:25.240 --> 0:17:28.400 for the election. Outcome, or like, help me understand, because 0:17:28.400 --> 0:17:31.040 deals actually are in the pipeline. They're working, and they're working, 0:17:31.240 --> 0:17:33.640 and so I don't know if there's really a cause 0:17:33.680 --> 0:17:34.480 and effect. 0:17:34.160 --> 0:17:37.560 Here or tell me, well, I think I think there 0:17:37.640 --> 0:17:39.840 was a couple of things that happened. Number One, I 0:17:39.880 --> 0:17:45.680 think interest the interest rate market started to stabilize. I 0:17:45.800 --> 0:17:49.560 think given the rate cuts along with the certainty from 0:17:49.560 --> 0:17:54.720 the presidential election, deals really started to move across the 0:17:54.720 --> 0:17:58.520 finish line. I think prior to second you know, even 0:17:58.600 --> 0:18:02.880 second quarter, you know, there was a lot of discussion 0:18:02.880 --> 0:18:05.800 of pipeline, but a lot of those deals just didn't close. 0:18:05.840 --> 0:18:08.080 A lot of hung deals, and that caused a lot 0:18:08.080 --> 0:18:11.040 of uncertainty in terms of hiring and also what could 0:18:11.080 --> 0:18:14.560 potentially impact bonuses. Now we're seeing deals come across the 0:18:14.560 --> 0:18:18.720 finish line. Fee income is coming in, so bonuses are 0:18:19.160 --> 0:18:20.439 much more certain than. 0:18:20.280 --> 0:18:20.840 They had been. 0:18:21.040 --> 0:18:24.200 Bonuses for who though bonuses I would say for deck 0:18:24.200 --> 0:18:28.560 capital markets, I would say that would be up, you know, 0:18:28.760 --> 0:18:32.520 twenty percent, twenty to twenty five percent. You're seeing the 0:18:32.640 --> 0:18:36.520 equity capital markets open up again, m and A. You're 0:18:36.520 --> 0:18:40.480 seeing deals come across the finish line there, and so 0:18:40.560 --> 0:18:43.360 I would expect, you know, a five to ten percent 0:18:43.440 --> 0:18:46.480 bump and bonus for them. We're not talking twenty twenty 0:18:46.520 --> 0:18:50.960 one levels, but definitely a much rosier picture than it 0:18:51.040 --> 0:18:54.080 has been over the past eighteen to twenty four months. 0:18:54.440 --> 0:18:56.359 You know, your team shared with us some notes. So 0:18:56.520 --> 0:18:59.600 the most significant compensation rebounds since the record breaking twenty 0:18:59.640 --> 0:19:00.840 twenty one one? Is that fair? 0:19:00.960 --> 0:19:01.200