Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
Speaker 1: you the latest news from the worlds of business and finance,
Speaker 1: plus technology, politics, economics, all purtnising the power of Business
Speaker 1: Week reporters and editors, not to mention our journalists and
Speaker 1: analyst in more than one and twenty countries. You can
Speaker 1: download Bloomberg Business Week at iTunes, SoundCloud, or Bloomberg dot Com.
Speaker 1: You can also listen to our radio show at two
Speaker 1: pm Eastern Time on Bloomberg Radio or watch us on
Speaker 1: YouTube search Bloomberg Global News. Shares of Target are having
Speaker 1: their worst day since Monday, October nineteenth, nineteen seven. We
Speaker 1: all know what happened on that day. That was Black Monday,
Speaker 1: where the Dow fell more than five hundred points at
Speaker 1: the time it was more than twenty percent of its
Speaker 1: value was shed. Shares now down of Target. Uh. It's
Speaker 1: on pace for its worst stock drop since that time,
Speaker 1: after becoming just the second big retailer in just two
Speaker 1: days the other one was Walmart to trim its at forecast.
Speaker 1: Justin Zach's writes all about it. He writes a column
Speaker 1: for Bloomberg Taking Stock. Sign up to read it on
Speaker 1: the Bloomberg and at Bloomberg dot com as well, justin
Speaker 1: good to have you with us your Bloomberg New Equities Report.
Speaker 1: In addition to writing the taking Stock column, I want
Speaker 1: to talk a little bit about the effect that targets
Speaker 1: disastrous quarter and earnings report is having on on the
Speaker 1: rest of the market. Here, margins of the concern. Inflation
Speaker 1: is the concern, and we're seeing it just ripple out
Speaker 1: across Yeah. I think a lot of UH investors had
Speaker 1: been positioned in companies like Walmart, who who also had
Speaker 1: a horrible earnings report yesterday and saw their largest stock
Speaker 1: drop since n as well on the exact same issue
Speaker 1: margin problems. There was this idea that you know, consume
Speaker 1: went if inflation went up, then consumers in general may
Speaker 1: look to lower priced UH retailers like Target and Walmart UH,
Speaker 1: and that really hasn't happened because inflation really is a
Speaker 1: facting the lower income in the middle lower middle class
Speaker 1: the most. And so what has happened is those individuals
Speaker 1: end up shifting their spending UH to what they absolutely
Speaker 1: have to have, like groceries. In a way from Uh,
Speaker 1: their discretionary spending and some of their you know, big
Speaker 1: box purchases, they may have made a target and that
Speaker 1: that caught everyone by surprise. And you highlight the fact
Speaker 1: that you know, this inflation risk we see really saw
Speaker 1: it in margins this this earning season. Uh. If I
Speaker 1: look past over the past two years, it feels like
Speaker 1: margins were sort of this shining star. I mean at
Speaker 1: the index level, it felt like there was a new
Speaker 1: record hit every quarter in terms of profit margins. Uh,
Speaker 1: it feels like we're starting to see the tides finally
Speaker 1: start to turn on that. Yeah, it's at some point
Speaker 1: it's gonna be hard for these companies to pass along
Speaker 1: their costs every time, especially with uh, the wage inflation
Speaker 1: we're seeing and really low rates of unemployment. The workers
Speaker 1: wages are now really catching up, and there's only so
Speaker 1: much savings left from the COVID stimulus that people have
Speaker 1: to spend. Uh. The other interesting part about this whole
Speaker 1: thing is, you know, the FED has really committed themselves
Speaker 1: to fighting inflation. And Jerome pop Pal, the chairman of
Speaker 1: the Federal Reserve Bank, spoke yesterday and said, basically, they're
Speaker 1: gonna do whatever it takes to tame inflation, and that
Speaker 1: could mean uh going past the neutral rate uh and
Speaker 1: and quite quickly. And so I think that is something
Speaker 1: that market participants have in mind when they see again
Speaker 1: this type of inflation popping up. Well, justin you take
Speaker 1: a look at the S and P five hundred, and
Speaker 1: you see what's moving lower today. Target by far the
Speaker 1: worst performer. That's followed by Dollar Tree, Tractor Supply, Costco, Wholesale, Uh,
Speaker 1: Dollar General. You got Best Buy in there. You got
Speaker 1: companies like Auto Zone and their Walgreens in there as well.
Speaker 1: I mean, it's pretty pretty ugly. These are companies though
Speaker 1: that people when they shop at these companies, when they
Speaker 1: shop at these stores, they shop there because they have to.
Speaker 1: And I'm wondering, you know, if if they're not necessarily
Speaker 1: gonna stop shopping there. But can't these companies pass along
Speaker 1: these higher costs to the consumers because well they have to? Well,
Speaker 1: and I think they have on food And so the
Speaker 1: food inflation for these companies is up double digits year
Speaker 1: on year, and so people are again shopping for the food.
Speaker 1: But when you when you're going in to buy your
Speaker 1: new furniture set or your new stereo, perhaps you're now
Speaker 1: gonna wait, or perhaps you're gonna buy one level down.
Speaker 1: You'll switch from your favorite uh, you know, brand name
Speaker 1: to something that is off label. Perhaps, so people are
Speaker 1: gonna make substitutions too, But you're right there going to
Speaker 1: continue to go to those stores. And when we think about,
Speaker 1: you know, what we learned in the past several weeks
Speaker 1: of earnings, I mean, clearly inflation, it's starting to bite
Speaker 1: for these companies, but it feels like we haven't necessarily
Speaker 1: seen demand to struction from consumers yet. Yeah, that's that's
Speaker 1: that's very true. And I think what I said before
Speaker 1: is we still have a pretty good savings from the
Speaker 1: consumer that they've saved up from from the stimulus. And
Speaker 1: the other thing is now we're having this reopening and
Speaker 1: I think a lot of people have really been wanting
Speaker 1: to get out and spend their money. And we have
Speaker 1: seen a little bit of demand destruction on the online side,
Speaker 1: and we've seen Amazon get hit. But I think people
Speaker 1: are going to finally get out this summer and spend
Speaker 1: that money, particularly on on on services. We're gonna see
Speaker 1: a shift from goods to services, which also is hurting
Speaker 1: UH companies like Walmart and Target. Because people will start
Speaker 1: to shift some of their discretionary spent towards airfare and
Speaker 1: hotels and other types of travel because they haven't traveled
Speaker 1: in two or three years. Yeah, we're talking to UH
Speaker 1: Hyatt Hotel CEO Mark Hoppolympzanian in a just a minute,
Speaker 1: so we'll definitely ask him about that. Justin just in
Speaker 1: the last thirty seconds that we have with you, I'm
Speaker 1: wondering how Target got this so wrong and how Anna
Speaker 1: Us got this so wrong. I think the analysts in
Speaker 1: in perhaps Target everyone was so focused on UH supply
Speaker 1: chain problems being the only problem, and they didn't really
Speaker 1: realize that the ultimate UH customer is the is there
Speaker 1: is their customer. The ultimate demand comes from their customer,
Speaker 1: and how how that customer behaves and what they spend
Speaker 1: on is is going to be more important than any
Speaker 1: smaller UH supply chain snaffood. Justin Zach is Bloomberg News
Speaker 1: Equities reporter. You can check out his column taking Stock,
Speaker 1: sign up to read it at the Bloomberg Terminal and
Speaker 1: at Bloomberg dot com. This is Bloomberg Radio. You're listening
Speaker 1: to Bloomberg Business Week with Carol Messer and Bloomberg quick
Speaker 1: takes Tim Stinovic on Bloomberg Radio. Hid Hotels reported results
Speaker 1: last week. The company beat on the top line and
Speaker 1: the bottom line loss was narrower than expected thanks to
Speaker 1: strong demand for leisure travel. The company said that it's
Speaker 1: our record levels of leisure demand and that it expects
Speaker 1: the recovery abroaden and strengthen in the mots ahead. Joining
Speaker 1: us now is Mark hoplamaze In the President and CEO
Speaker 1: of Hyatt Hotels. Mark joins us via Zoom from Plaia
Speaker 1: del Carmen in Mexico. Mark, really good to have you
Speaker 1: with us. Uh, how are you well at the moment?
Speaker 1: I couldn't be better because I'm I'm sitting in the
Speaker 1: brand new Secrets Moche, which is just north of Plato Karmen.
Speaker 1: It's a magnificent new resort and it's a beautiful day.
Speaker 1: So I'm in good shape at the moment. Thank you.
Speaker 1: How are you doing? Yeah, we're okay, I mean, and look,
Speaker 1: usually when people are in Pla del Carmen, they're not
Speaker 1: working at least if they're you know, if they don't
Speaker 1: live there, they're just traveling there to uh to have
Speaker 1: a good time. Um, we're good, but you know we're
Speaker 1: focused on the volatility and the sell off and inflation
Speaker 1: and what we're seeing. And I know that you talked
Speaker 1: about summer bookings being higher by fifty from one levels
Speaker 1: for all inclusive results, a lot of good signs coming up.
Speaker 1: But that was last week and that was last quarter.
Speaker 1: I'm wondering what you're seeing right now on a day
Speaker 1: when the Nasdaq is down more than four point six percent,
Speaker 1: the S and P five hundred down three point seven percent.
Speaker 1: Does this volatility do the results from Target, the results
Speaker 1: from Walmart? Does that concern you at all? Well? I
Speaker 1: think the connection point UH over a longer period of
Speaker 1: time to our consumer, which tends to be a higher
Speaker 1: end UH traveler at the higher end of each of
Speaker 1: the stegments that we serve UM is if there's a
Speaker 1: I guess, very long and persistent sell off in UH
Speaker 1: in public equities, because many of the customers that we
Speaker 1: serve are invested in the marketplace. But I don't think
Speaker 1: day day in and day out volatility actually changes UM
Speaker 1: the booking behaviors on a real time basis. Right now,
Speaker 1: I think that there's a scarcity issue. People want to
Speaker 1: make sure that they've got their bookings for the holiday periods. Um,
Speaker 1: we're seeing booking levels across all of our hotels, not
Speaker 1: just resorts now for the summer holidays up between twenty
Speaker 1: for um Labor Day, fourth of July and Memorial Day,
Speaker 1: and so I think that's one of the drivers. And
Speaker 1: the second thing is corporations and associations, which is a
Speaker 1: significant part of our business, are coming back to meetings
Speaker 1: in a meaningful way and the booking levels there are
Speaker 1: also rising. So UM, we do see booking levels maintaining
Speaker 1: at this point. And you know, I would say if
Speaker 1: there's a very long and drawn out bear market or
Speaker 1: or recession, then of course it's going to affect all businesses.
Speaker 1: But I think our customer base, being relative at the
Speaker 1: relatively higher end of of the you know, income scale,
Speaker 1: are more resilient and less subject to volatility in terms
Speaker 1: of their travel patterns, especially for leisure and mark. I
Speaker 1: want to dig into that final point because obviously after
Speaker 1: the week of earnings that we've had, the consumer is
Speaker 1: definitely in focus how they might be shifting their spending,
Speaker 1: spending more on staples, less on sort of discretionary purposes.
Speaker 1: And you mentioned that bookings obviously for the summer months
Speaker 1: up across the board. But I'm curious, have you seen
Speaker 1: any indications that revenue spending on vacations could be slowing
Speaker 1: down or shifting? No, Uh, not at all. On the contrary,
Speaker 1: I would say we've had, Um, we've had a significant
Speaker 1: increase in spend. Our rates are up significantly from twenty nine.
Speaker 1: A lot of this is really driven by pent up
Speaker 1: demand and by a really really strong human desire to
Speaker 1: reconnect with people. So um, I think it's you know,
Speaker 1: people are making their decisions based on what they're going
Speaker 1: to be most fulfilled by and what matters the most
Speaker 1: to them, and that is reconnecting with with friends and family. Mark.
Speaker 1: I know that you do serve a higher and clientele,
Speaker 1: but everybody has their limits when it comes to spending.
Speaker 1: And I wonder about air fare prices. They are up
Speaker 1: double digits from last month, double digits from last year. Uh.
Speaker 1: I don't know if you our listeners are familiar with this.
Speaker 1: Checking the price of flights right now, it's kind of
Speaker 1: mind boggling to see how much it is to fly
Speaker 1: a short distance thanks to you know, huge demand, lack
Speaker 1: of supply, and then of course oil prices as well.
Speaker 1: How do you think about that in the context of
Speaker 1: what a consumer spends when they do visit one of
Speaker 1: your properties. Yeah. It. First of all, UM, I would
Speaker 1: just note that we UH we now own the largest
Speaker 1: tour operations tour operator platform in the UH in North America,
Speaker 1: so it's called a l G vacations UM. Back in
Speaker 1: they handled over three million passengers and it's mostly doing
Speaker 1: selling packaged UM travel, so airfare included UM and so
Speaker 1: we tracked we're tracking this extremely closely UM. And I
Speaker 1: would say that there's no question that we have seen
Speaker 1: a significant increase in airfares, and I think that will
Speaker 1: persist for some period of time until supply demand starts
Speaker 1: to balance out a bit. And the supply demand I'm
Speaker 1: talking about right now has to do with schedules, how
Speaker 1: many planes are in service UM. I would note that
Speaker 1: the air the air traffic, the total lift capacity into
Speaker 1: Cancoon and Punta Kana, which are too very large markets
Speaker 1: for US UM in a l G dcations are up
Speaker 1: UM as compared to levels. So it's clear that the
Speaker 1: airlines have have definitely clued in on where demand is
Speaker 1: and they've added capacity. UM. It is also true that
Speaker 1: air fares are up in that they're under some inflationary pressure.
Speaker 1: So I think that the dynamics for them have in
Speaker 1: part to do with energy prices or you know, get
Speaker 1: gas for their their aircraft aviation guests. And for US,
Speaker 1: UM we look at how total unit value or total
Speaker 1: package prices are increasing, and they are. But again I
Speaker 1: think UM, I think as things start to stabilize in
Speaker 1: the oil and gas markets, and as we see supply
Speaker 1: being brought back with more schedules, more aircraft and more
Speaker 1: pilots um UH back into the industry, we'll start to
Speaker 1: see a rebalancing. And that may that may take a
Speaker 1: number of months to do, but I think that that's
Speaker 1: the that's the inevitable outcome. And I want to talk
Speaker 1: about all inclusive resorts because you acquired one all reclusive
Speaker 1: result results can't talk today. UH. You acquired Apple Leisure
Speaker 1: Group last year and UH seems to be very popular,
Speaker 1: especially in UH the Caribbean. Do you have any plans
Speaker 1: to bring that model to your US hotels? Yeah? Actually
Speaker 1: right now, I would say that the focus remains in
Speaker 1: Mexico and the Caribbean. UM. We've and are some of
Speaker 1: our key markets are Mexico first and foremost UM, the
Speaker 1: Dominican Republican Jamaica. We also have a large operation in
Speaker 1: Europe in the Balieric Islands and in the Canary Islands
Speaker 1: and in the southern coastal areas of Europe. UM we
Speaker 1: just UM we're just now engaging with owners and developers
Speaker 1: in the Middle East and ultimately in Asia. We think
Speaker 1: that all inclusive is a great format and can be
Speaker 1: extended across the globe. UM. The the particular arena that
Speaker 1: we're playing in is luxurial Inclusive UM, which a LG,
Speaker 1: the Apple Leisure Group actually really created from schooch about
Speaker 1: twenty years ago, and so we are now the largest
Speaker 1: player in the world in luxurial inclusive and the the
Speaker 1: guest proposition is very very compelling because UM, you take
Speaker 1: a lot of the transactional elements that you might experience
Speaker 1: in a European plan hotel where everything is all a
Speaker 1: cart Um, You're you're taking a bunch of transactional friction
Speaker 1: out of the equation and it's serves its purpose when
Speaker 1: you're on holiday. I do think that there's a that
Speaker 1: we can actually apply this format in the US. UM.
Speaker 1: We are not. I can't tell you that we've got
Speaker 1: a pipeline of such deals. But I think there are
Speaker 1: probably specific markets that would be really well suited to
Speaker 1: it at certain markets in in Florida and and probably
Speaker 1: in Hawaii as well. And UM so we're we will
Speaker 1: investigate this, but right now we have a lot on
Speaker 1: our plate with respect to just growing um fulfilling up
Speaker 1: the pipeline that we already have to build more hotels
Speaker 1: in Mexico, the Caribbean. Mark just ten seconds left. You
Speaker 1: have all the employees you need? Do you have all
Speaker 1: the employees that you'll need this summer? You know that.
Speaker 1: I'll tell you the American Hotel Lodging Association did a
Speaker 1: great benefit to the entire industry by working and successfully
Speaker 1: getting an increase in h two V visas UM these
Speaker 1: are temporary work visas for the summer that that is critical.
Speaker 1: So we're going to benefit from that, and we've we've
Speaker 1: made some changes in our hiring practices and we're seeing
Speaker 1: more success than being able to bring people back to
Speaker 1: the hospitality industry. Mark Hoplmaze and President and CEO of
Speaker 1: Hiatt Hotels, joining us via zoom from Plaia del Carmen, Mexico.
Speaker 1: Not on vacation. I promise he's working. Well, he's there. Mark,
Speaker 1: Thanks so much for taking the time and joining us.
Speaker 1: This is Bloomberg Business Week with Carol Messer and Bloomberg
Speaker 1: Quick Takes Tim Stinovic on Bloomberg Radio. It's been nearly
Speaker 1: fourteen years since Lehman Brothers collapsed and declared bankruptcy, marking
Speaker 1: the beginning of the two thousand eight financial crisis. But
Speaker 1: it's not completely dead and just in a nod to
Speaker 1: the Princess Bride, just mostly dead. It's the cover story
Speaker 1: for the upcoming edition of Bloomberg Business Week. Jeremy Hill
Speaker 1: is the co author. He's bankruptcy and distress debt reporter
Speaker 1: for Bloomberg News, also with us as Joel Webber. Webber,
Speaker 1: he's the editor of Bloomberg Business Week. Both of them
Speaker 1: are with Katie Greifeld and me and the Bloomberg Interactive
Speaker 1: Broker's studio in New York. Joel, I gotta tell you
Speaker 1: a little behind the scenes. Yesterday after our interview, you
Speaker 1: showed me the cover story. You shall be the cover
Speaker 1: of this, you know. I think because we're in the
Speaker 1: building it Joel can do anything he wants, and I
Speaker 1: saw that it was Lehman Brothers, and I'm thinking to myself, Joel,
Speaker 1: We're we're done with a financial crisis. We're in a
Speaker 1: different crisis right now. Why a cover story on Lehman Brothers. Well,
Speaker 1: you know you had that great Princess Brad reference to
Speaker 1: something being mostly dead. Lehman is actually nearly dead, which
Speaker 1: is more than mostly I think. Uh. And and Jeremy
Speaker 1: who is on the Jeremy Hill who's on the Code violence.
Speaker 1: The story with Luca de Paula. Luca actually called me,
Speaker 1: I don't know, six months ago and he's like, hey,
Speaker 1: I met this guy who's like caring for the state
Speaker 1: of Lehman and he's basically like working himself out of
Speaker 1: a job. He's been there for like fourteen years, ever
Speaker 1: since the bank went down, and you know, he's basically
Speaker 1: been tasked with like eking every last pinion out of
Speaker 1: this corpse. And I was like, you had me at Lehman,
Speaker 1: But okay, tell me the most of the story. Uh So, So, Jeremy,
Speaker 1: who are these people? And you know the great iron here,
Speaker 1: Tam that you mentioned is like, you know, we're we're
Speaker 1: in some version of a of a sell off. Now,
Speaker 1: everyone's fearful that you know, the bottom could fall out
Speaker 1: at any moment and things get much worse. And here
Speaker 1: we are talking about, you know, the thing that kicked
Speaker 1: off a financial crisis all those years ago. Um, Jeremy,
Speaker 1: how did how did you find a role in this story? Um? Yeah? So,
Speaker 1: as a bankruptcy and distress debt reporter, I'm always pouring
Speaker 1: through legal documents and looking for wonky court fights about
Speaker 1: this and that, who is old one and why they
Speaker 1: are owded? And as you said, Luke actually got in
Speaker 1: touch with me about this, this case going on in
Speaker 1: the UK over these weird subordinated notes called e caps,
Speaker 1: and he's like sending me stories about how it's so
Speaker 1: interesting that you know, these guys they got these they
Speaker 1: got these scraps of debt for almost free, and they
Speaker 1: might get a bunch of money. It's very complicated. But
Speaker 1: underneath all of this are these people that are ill
Speaker 1: in what are now small offices in the US and
Speaker 1: in the UK that are kind of overseeing the corps
Speaker 1: of Lehman Brothers. They're they're pushing paper, they're looking for
Speaker 1: good times to sell their remaining assets and uh, as
Speaker 1: you said, kind of eking out those those last pennies
Speaker 1: from the estate and Jeremy. You have a lot of
Speaker 1: great characters in here. Let's start with Darryl Radigan. Who
Speaker 1: is he? Daryl Radigan? That was Luca spoke a lot
Speaker 1: with him. He has been in charge of UM some
Speaker 1: property assets in the UK and has done a fantastic
Speaker 1: job from what we can tell, because creditors there have
Speaker 1: done much much better than anybody expected. UM. So he
Speaker 1: was basically one of the people that was tasked with,
Speaker 1: rather than dumping all of the bad property assets when
Speaker 1: we went bankrupt, kind of waiting, letting those mature like
Speaker 1: a fine wine and then finding a good time to
Speaker 1: sell them. So obviously there are a ton of bankrupts
Speaker 1: these every year, uh, none as big as Lehman. But
Speaker 1: what what else has distinguished Lehman's long, slow death. The
Speaker 1: size is, of course important, The length is extremely notable,
Speaker 1: because I mean we're talking about nearly fourteen years here.
Speaker 1: Bankruptcy is often you know, even when they fade away
Speaker 1: from the headlines, there's a lot of clean up work
Speaker 1: to do UM But you know, mostly we're talking a
Speaker 1: few years, five years something sears for example, still going
Speaker 1: on in the background. There's things to sort out there.
Speaker 1: But I mean, this is more than a decade we're
Speaker 1: talking about. Everybody has not forgotten about Lehman. But I'm
Speaker 1: sure I wasn't aware that they still have an office
Speaker 1: space in the Bowery Savings Bank building in Midtown. People
Speaker 1: so so kicking. It's their their whole life. They're living
Speaker 1: and breathing Lehman Brothers to this day. It is the
Speaker 1: cover story of the upcoming issue of Bloomberg Business weeken.
Speaker 1: It's a great read when you're actually reading it in
Speaker 1: the magazine, but it's also a really good read if
Speaker 1: you're reading it online because it's an interactive presentation, and
Speaker 1: I think it gives a really good ex planation of
Speaker 1: of how creditors are repaid Jeremy, for people who aren't
Speaker 1: familiar with it. Can you kind of sort of go
Speaker 1: through that waterfall? Sure? Yes, when we talk about a
Speaker 1: waterfall in bankruptcy, uh, you wanna sort of imagine a
Speaker 1: stack of champagne flutes? Um that? By the way, Sorry
Speaker 1: about that, jo Joel? Did you hold on, hold on,
Speaker 1: hold on, Joel? Did you know that before you were
Speaker 1: ordering the art and doing the graphics. I like champagne,
Speaker 1: you know, and I like my champagne and more than yeah,
Speaker 1: you know, just so you're gonna drink it, drink it
Speaker 1: right right? Sorry, go ahead, Well that's that's that's very okay. UM.
Speaker 1: So imagine a waiter pouring the champagne um into the glasses.
Speaker 1: I'm not even going to try to pronounce the correct
Speaker 1: word um. The people with the most senior debt we're
Speaker 1: talking about like secured loans, like a mortgage. UM on
Speaker 1: the house is secured by the house itself. People who
Speaker 1: actually have claims to the assets, they get their cups
Speaker 1: filled up first, and then below the those their cups
Speaker 1: that have weaker claims to the estate or none at all,
Speaker 1: so they just get whatever is overflowing um. In the UK,
Speaker 1: there was way more champagne than anybody anticipated, so people
Speaker 1: at the very bottom ended up getting their fill um.
Speaker 1: And that's very unusual. I don't know. I'm still stuck on, Darryl.
Speaker 1: I mean, how many people are You're still stuck on champagne?
Speaker 1: I mean, thank you. I hate I hate coop glasses.
Speaker 1: I have to say, they're so hard to drink out
Speaker 1: of it. But anyway, Darryl Radigan, how many just makes
Speaker 1: you drink it? Quicker. I don't know, just to get
Speaker 1: it at a level where you can actually use the glass.
Speaker 1: Then you guys are where it's my birthday tempt Yeah,
Speaker 1: I'm surprised, Champagne, thank you. Um later after five, Jeremy,
Speaker 1: how many people are there, like Darryl Radigan that are
Speaker 1: just sort of helping to put Lehman finally in his
Speaker 1: final resting place. Sure, so let's talk about the US. UM.
Speaker 1: Not so long ago, a few years ago, there were
Speaker 1: a couple of hundred people that were still sort of
Speaker 1: acting as portfolio managers for this like used financial assets, sales,
Speaker 1: lot um. And now we're down to about twenty as
Speaker 1: best as we can tell. UM. Not a lot of
Speaker 1: going into the office these days, as with many of us.
Speaker 1: But so we're all here. We are all here today, Jeremy,
Speaker 1: Is there any sense about how much money has been
Speaker 1: eaked out of this thing? Because one of the one
Speaker 1: of the things that surprises me is like it just
Speaker 1: seems like there were they were gyms in this thing, right,
Speaker 1: and everyone just assumes, oh, it's Lehman brothers, it's gone.
Speaker 1: But it's like part of the reason this has taken
Speaker 1: so long is because there was so much value locked
Speaker 1: up in it, right, how much any sense of what
Speaker 1: was actually hidden in there? That's right. Yeah, So it's
Speaker 1: it's uh, it's hard to uh paying a complete picture
Speaker 1: of how much money has been paid out because there's
Speaker 1: so many different slices of of the estate. As part
Speaker 1: of why it has taken so long to sort out
Speaker 1: all over the world, many different classes of creditors. One
Speaker 1: particularly important class has so far recruped about half of
Speaker 1: their money. And for that, for that class of creditors,
Speaker 1: we're looking at like forty billion dollars. That's double what
Speaker 1: Lehman itself estimated it will be able to pay out
Speaker 1: back in UM. But some people even did better. Those
Speaker 1: decaps notes that Luca was telling me about, the very
Speaker 1: wonky pieces of financial engineering UM. Some of these notes
Speaker 1: were actually given away for free in recent years because
Speaker 1: they were so worthless. Thought to be so worthless, those
Speaker 1: free scraps of paper could end up being worth millions
Speaker 1: of dollars depending on how some court cases in the
Speaker 1: UK play out. I gotta go ahead. Well. One of
Speaker 1: the curiosity is so much of the story and Luca
Speaker 1: being based in London, a lot of the story takes
Speaker 1: place there. You did mention the U S element? How
Speaker 1: do how do the UK and US elements relate to
Speaker 1: one another? Right? So, in the U S you've got
Speaker 1: the big parent company, like the ultimate uh yeah, the
Speaker 1: the ultimate parent of Lehman. But overseas in the UK
Speaker 1: they actually had their own deal that it's a subsidiary.
Speaker 1: But they're not run by the same people. In some
Speaker 1: cases they don't like each other because they each have
Speaker 1: their own creditor bodies that they're representing and that they
Speaker 1: are trying to maximize value for. I do love the
Speaker 1: idea of how you measured the length of this bankruptcy
Speaker 1: for presidential administrations, I mean literally lifetimes ago and this
Speaker 1: thing is still going on, Jeremy, just in the last
Speaker 1: forty seconds that we have with you. What is the
Speaker 1: legacy of the bankruptcy and the aftermath? My big takeaway
Speaker 1: from this reporting process, Um, things worked out a lot
Speaker 1: better for Lehman creditors than almost anybody would have predicted,
Speaker 1: except for the shrewd investors that as soon as Lehman
Speaker 1: went bust, when everybody else was freaking out and panicking,
Speaker 1: said this seems really interesting. It's a very complicated structure.
Speaker 1: Let's sharpen our pencils, figure out what this stuff is
Speaker 1: really worth. Because we have an edge the people they
Speaker 1: were able to do that. Big asset managers specialize in
Speaker 1: distress vulture investors. Although they might not like to be
Speaker 1: called that, they did very very well to summon up
Speaker 1: in the word inconceivable. There we go. It all goes
Speaker 1: back to the Princess bride. Joe Weber, editor of Bloomberg
Speaker 1: Business Week, Jeremy Hill, Bankruptcy and Distress Debt reporter, both
Speaker 1: with us in the Bloomberg Interactive Broker Studio. Check out
Speaker 1: Jeremy's story. It's the cover of the upcoming issue of
Speaker 1: Bloomberg Business Week magazine. Read it now in the Bloomberg
Speaker 1: and at Bloomberg dot Com. You're listening to Bloomberg Business
Speaker 1: Week with Carol Masser and Bloomberg Quick Takes. Tim Stinovic
Speaker 1: on Bloomberg Radio. Well, the Tiger Couds, their audience is
Speaker 1: very familiar with them. They're so named because their founders
Speaker 1: all worked under the legendary investor Julian Robertson. Over at
Speaker 1: Tiger Management. We're talking about comes companies like Tyler Global,
Speaker 1: Tiger Global Management, Co. To Management Loan Pine Capital, Maverick Capital,
Speaker 1: d One Capital, and more. It's something that Hamma Harmer
Speaker 1: writes about whose hedge fund reporter for Bloomberg near she's
Speaker 1: with us now in the Bloomberg Interactive Broker Studio. I
Speaker 1: mean on a day like today, Emma, where we're seeing
Speaker 1: you know, multi level multi year lows for the SMP
Speaker 1: five hundred and multi month lows for the NASTAC one hundred. Uh.
Speaker 1: It's easy to say that, you know, nobody's really doing
Speaker 1: well right now, but how much more are the Tiger
Speaker 1: cubs hurting than the industries represent Yeah, the Tiger Cubs
Speaker 1: have been having a very difficult year. These are funds
Speaker 1: that typically focus on tech stocks or consumer stocks. Um.
Speaker 1: They were all trained un into julian Um and they
Speaker 1: have been known to sort of travel similarly travel impacts.
Speaker 1: We are seeing a little bit more dispersion more recently,
Speaker 1: but some of the funds that have been hit the
Speaker 1: worst is Tiger Global. They're down, you know, in the year,
Speaker 1: which is putting them on track for their worst year ever. UM.
Speaker 1: I seeing d one who is a Tiger Grand Cub
Speaker 1: became from Viking, which itself as a Tiger cub and
Speaker 1: UM they're down you know, about twenty UM, so you're
Speaker 1: seeing double digit losses. Other funds are down, but maybe
Speaker 1: not down quite as much in the tiger cubs. But generally,
Speaker 1: if you've got exposure to like tech giants, if you've
Speaker 1: got UM exposure to some of these consumer companies, UM,
Speaker 1: it's it's very it's been very, very painful. I feel
Speaker 1: like it's hard to feel bad for them because I
Speaker 1: mean the adage that I always here is that you
Speaker 1: know you have voluer markets, you have you know, blood
Speaker 1: on the streets if you will. That's when active managers,
Speaker 1: when hedge funds should shine. So for years, if you remember,
Speaker 1: hedge funds were complaining about their not being in a
Speaker 1: volatility and then the past few years we've definitely seen
Speaker 1: volatility UM. So when they were complaining about them not
Speaker 1: being enough, you know, macro funds, we're really struggling then,
Speaker 1: and now macro funds are actually doing a lot better
Speaker 1: because UM they've been able to capitalize on this volatility. UM.
Speaker 1: There's also good vall and bad vall, and so bad
Speaker 1: vall is when you just like you don't know what's happening,
Speaker 1: you don't see it coming. It comes up and down
Speaker 1: in spurts versus good volatile is a little bit more consistent,
Speaker 1: and so you're able to make more money from it. Gosh,
Speaker 1: what really surprised me about reading this hemma was how
Speaker 1: much concentration there was, or maybe not concentration, but overlap
Speaker 1: there was between the stocks that these different hedge funds,
Speaker 1: these different Tiger cubs held. You know, companies like Door, Dash, Bar, Fetch, Netflix,
Speaker 1: see Shopify, Block the company formerly known as Square, all
Speaker 1: held by multiple of these firms. Well, how do you
Speaker 1: explain that? So, because they were all trained under Julian Robertson,
Speaker 1: they take a similar approach. They focus on stocks versus
Speaker 1: more diversified stuff. They do some privates as well too.
Speaker 1: They've all been increasingly investing in privates. They focused on
Speaker 1: tech and consumer stocks um and so they tend to
Speaker 1: travel around these sames like Caravanna and Netflix. These are
Speaker 1: companies that you know, all the fangs for a long time,
Speaker 1: you saw them like going in and out of them.
Speaker 1: What's interesting from the thirteen filings that we saw on
Speaker 1: Monday was Maverick and Co. To both increase their steak
Speaker 1: in Cavana, which, as you see now that is incredibly
Speaker 1: whisky and it clearly has not worked out well. Um,
Speaker 1: we saw Code to increase a steak in Netflix. We
Speaker 1: saw D One, Maverick, and Viking all increase their steak
Speaker 1: in Ribvian. So these are you know, companies that have
Speaker 1: had a very very difficult one. Um. On the flip side,
Speaker 1: they've you know, while Coachy increased steak and Netflix, Maverick
Speaker 1: and Tiger Tiger Global decreased. So it's not like everyone's
Speaker 1: doing the same thing, and we are seeing more dispersion.
Speaker 1: Our story has shows some overlapping stocks and while you know,
Speaker 1: previous dus you might have seen more people in and
Speaker 1: out of the same you are seeing some splits, you
Speaker 1: know about even I think it was Microsoft three people,
Speaker 1: three of the funds sold those steak and three added.
Speaker 1: So it's but yes, it's generally the same type of
Speaker 1: names that we're talking about here. And it's interesting you
Speaker 1: point out in your story that you know, for a
Speaker 1: long time the Tiger clubs, they really kind of went
Speaker 1: into the same names, but breaking apart a little bit. Now. Yeah,
Speaker 1: so um, other popular names like JD dot com that
Speaker 1: was one where we saw some selling. About four of
Speaker 1: the six cubs sold in those UM meta platforms, So Facebook,
Speaker 1: about three funds sold while two added so UM and
Speaker 1: what was actually really interesting, So if you look at
Speaker 1: one of the tables in our story, we picked up
Speaker 1: on what were the two biggest new purchases like brand
Speaker 1: new steaks that these guys were investing in, and how
Speaker 1: do they do? And across the board, all of them
Speaker 1: are down. So that's Dave for Tiger Global, that's Docu
Speaker 1: signed for co to UM, that's Atlasias Atlasian for d
Speaker 1: one Tea. Yeah, and so they're down like double digits.
Speaker 1: Now I should mention some of these could be private
Speaker 1: stakes that have turned public post and I p O
Speaker 1: and so they can't get out of them for several months.
Speaker 1: So they're stuck regardless. But um, you know it's clear
Speaker 1: it's not great. So the thirteen that we get their
Speaker 1: backward looking. So we don't know necessarily what these hedge
Speaker 1: funds are doing right now. But what does your reporting
Speaker 1: tell you about their strategy moving forward for the rest
Speaker 1: of the year. How do they salvage this? So UM, yes,
Speaker 1: it's it's they file these documents because they have to,
Speaker 1: nobody wants to, and they follow them forty five days
Speaker 1: after the end of each quarter. So this gives us
Speaker 1: some insight as to how they would navigate those first
Speaker 1: three months. Um, we're definitely keeping a lookout to see
Speaker 1: what are they doing now? Are they increasing these stakes?
Speaker 1: Are they decreasing them? Um, it's tough because you can't
Speaker 1: ditch it all right away. UM. I mean, I guess
Speaker 1: you could, but you're also losing on that side too.
Speaker 1: And then um, and did you look at their valuations
Speaker 1: on the private stuff? Um, you know, there's a lot
Speaker 1: of speculation over like how are those things gonna be
Speaker 1: marked down? As private markets are also a little bit complicated.
Speaker 1: Ham A Parmer is hedge fund reporter for Bloomberg News.
Speaker 1: She joins us from the Bloomberg Interactive Broker Studios. Check
Speaker 1: out her story. It's written along with Tom Maloney, hedge
Speaker 1: Fund of Hell, how the tech crashes, clabbering the Tiger
Speaker 1: Cubs broad Journal. Yeah but you let me drive? Oh no, no, no, no, oh,
Speaker 1: I don't want to drive the Drive to the Clothes thing.
Speaker 1: Well up on Bloomberg Radio, it is the Drive to
Speaker 1: the clothes. Right now, the SMP five hundred having its
Speaker 1: worst day since June of it's down more than four percent.
Speaker 1: The nastac Can posit down four point seven percent, the
Speaker 1: Down down three point six percent. Let's get into it
Speaker 1: and drive to the close with David Deet's managing principal
Speaker 1: and senior portfolio strategist at Pepack Private Wealth Management. He
Speaker 1: joins us on the phone from Summit, New Jersey. Peapack
Speaker 1: Private Wealth Management has got about ten point seven billion
Speaker 1: dollars in assets under management. David, how are you very good? Tim?
Speaker 1: Thank you? You are very good on a daylight today.
Speaker 1: I mean it's pretty rough out there were you know,
Speaker 1: surprisingly the phones have not been ringing off the hook
Speaker 1: certainly all year UM investors have been very nervous and
Speaker 1: we've been holding a lot of hands. The problem for
Speaker 1: this year, Tim has been where do you go? Because
Speaker 1: people are all still looking at those bond holdings dropping
Speaker 1: close to ten percent as well UM the alternatives like
Speaker 1: bitcoin have crashed, So, uh, there's only cash. But you know,
Speaker 1: with inflation close to eight percent, cash doesn't look very
Speaker 1: good at the long for the long haul either. So
Speaker 1: it's it's there real hand reading time for investors. So
Speaker 1: where should they go right now? Well, so you go
Speaker 1: back to your your your time frame. I think the
Speaker 1: first thing is you need to have a longer time
Speaker 1: frame than just next month or even year end. The
Speaker 1: time for the day trading and for the for the
Speaker 1: rapid swipe right and make a lot of money, that's
Speaker 1: all gone. Um. Second, you need to be diversified. You
Speaker 1: know before of course, up until just this week, people
Speaker 1: said dismissed a lot of losses. Those crazy tech investors,
Speaker 1: those crazy crypto guys, um, those crazy new economy people.
Speaker 1: They're the ones that you know are losing big and
Speaker 1: they deserve it because in potential to valuations. Now, of
Speaker 1: course you're seeing it's creeping into mainstream Dow stocks, you know,
Speaker 1: Walmart of course, Target disaster, so it's spreading out. See,
Speaker 1: you really need to be spread out. You can't hide
Speaker 1: in one area and say I'm safe. That's what I
Speaker 1: want to get into Walmart, Target. But I do want
Speaker 1: to say it is my birthday. I was born twenty
Speaker 1: nine years ago in Summit, New Jersey. So cool to
Speaker 1: talk to you. But overlook overlook, right overlook hospital overlook. Yeah, absolutely,
Speaker 1: up on the hill overlooking. It's the name Summit, New Jersey. Yeah, yeah,
Speaker 1: you got it, you got it. But let's talk about
Speaker 1: Walmart and Target. And I mean you mentioned that investors
Speaker 1: in some of those more speculative names they're getting crushed.
Speaker 1: But I mean you just look at the declines that
Speaker 1: we're seeing in Target losing what a quarter of its
Speaker 1: value just Walmart also really falling by the move, just
Speaker 1: some pretty amazing size and scopes. It's not an overreaction.
Speaker 1: I know it's bad out there, but man, those are
Speaker 1: some big numbers, you know, I'm not sure it is
Speaker 1: an overreaction. When you look at the magnitude of the
Speaker 1: miss by Target today, it was pretty um stunning. Uh well,
Speaker 1: so what did we learn? I think that um, although
Speaker 1: consumer demands seems reasonable, there was just the complete unwillingness
Speaker 1: or inability by Target to pass along the higher prices
Speaker 1: at seeing UM. And so that's disturbing for a number
Speaker 1: of reasons. One is that a lot of bulls out
Speaker 1: there said, gee, you know, there's inflation, but inflation tends
Speaker 1: to favor stocks in um, companies can just increase prices
Speaker 1: with inflation not so much to worry about. Well, that
Speaker 1: kind of that story has been uh dismissed today. UM.
Speaker 1: You know. The second, of course, is the the idea
Speaker 1: that um that that the consumer was going to stay strong,
Speaker 1: that they still had big bank accounts from government transfer payments.
Speaker 1: You know, we had this such strong employment wages going
Speaker 1: up that they could continue to spend. Well, that seems
Speaker 1: to have been dissipated today. The only thing people can
Speaker 1: hide behind is that the idea that consumers are now
Speaker 1: going to the experiential things, you know, they want to
Speaker 1: travel airbnbs, airlines and so forth, and they're moving away
Speaker 1: from uh, the just the goods. Uh that Target and
Speaker 1: Walmart are selling. But I'm not sure that's so satisfying. Yeah,
Speaker 1: I mean, look, you sound like the CEO of Hyatt
Speaker 1: who we spoke too earlier in the program today, who
Speaker 1: did tell us that experiences and look talking you know,
Speaker 1: he's of course talking his book a little bit or
Speaker 1: a lot. But we are still seeing people, you know,
Speaker 1: buy those plane tickets, and we're hearing that from airlines
Speaker 1: as well. The question is demand destruction, David Hey. Before
Speaker 1: we get to that, though, I want to talk about
Speaker 1: the bottom here because I'm curious if you are seeing
Speaker 1: signs that we're at the market bottom. Well, we're definitely
Speaker 1: seeing signs. The question is are all the boxes checked off.
Speaker 1: So some of the signs where we may be at
Speaker 1: the bottom is we're seeing extraordinarily low levels of sentiment
Speaker 1: among retail investors. Indeed, we're seeing huge cash pile ups
Speaker 1: by institutional investors. By some measures, the biggest amount of
Speaker 1: cash is now being hoarded by fund managers since two
Speaker 1: thousand one of America survey that came out yesterday. Yeah,
Speaker 1: you know, the flip side is someone said that they're
Speaker 1: also buying a lot of calls just to hedge themselves
Speaker 1: in case there's a big rapid brought up in the
Speaker 1: in the triple QUS and aztecs, so maybe they're not
Speaker 1: so uh cautious as as that one METROC group suggests.
Speaker 1: We're seeing a number of days of course with sucks
Speaker 1: down on heavy volume. Um, you know, so those are
Speaker 1: metrics that are suggesting that when your bottom. But the
Speaker 1: flip side is we saw the VIX, which is that
Speaker 1: fear indicator, sore to eighty five in the pandemic month
Speaker 1: of March two thousand twenty. Today it's below thirty. It
Speaker 1: hasn't gotten above thirty five for a long time, so
Speaker 1: that would suggest we haven't had that one huge panic waterfall, Uh, sale.
Speaker 1: Of course, the other thing is bottoms maybe tougher here
Speaker 1: because in the past, and we had kind of a
Speaker 1: quick bottom, the FED was always coming to the rescue here,
Speaker 1: you know, just just yesterday. Basically, um Jerome Pile suggested
Speaker 1: that if the if the price of stomping out inflation
Speaker 1: was pain for consumers, so be it. But how can
Speaker 1: the consumers experience pain and there'd be no pain for investors?
Speaker 1: And David, I mean, do you think the FED does
Speaker 1: step in at any point? I know that you know
Speaker 1: the FED puto has been written a bunch of times,
Speaker 1: but at what point do you think they would step in?
Speaker 1: And really have about forty seconds left? You know right now,
Speaker 1: you'd have to be cautious about predicting there being any
Speaker 1: FED put any time soon. In fact, I think some
Speaker 1: part of the strategy is to squash some of the
Speaker 1: demand that the Marriott CEO is talking about. And how
Speaker 1: do you do that Because of the large bank accounts,
Speaker 1: you get them where it really hurts, which is their
Speaker 1: stock account. So they may want to see this market
Speaker 1: taken down a few more notches so that that will
Speaker 1: help cool some of the demand to high end in
Speaker 1: order to really get inflation out, so I don't think
Speaker 1: the FED what is anytime soon? All right? David Deed's
Speaker 1: managing principal and senior portfolio strategist at Peapack Private Wealth Management,
Speaker 1: joining us on the phone from Summit, New Jersey. Thanks
Speaker 1: for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com, and you can also listen to
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio
Speaker 1: or watch us on YouTube. Search to Bloomberg Global News