WEBVTT - Daybreak Holiday: OPEC+ Delays, Holiday Shopping Begins, Google Antitrust Case, Ozempic Effect 0:00:02.040 --> 0:00:05.480 Thanks for joining us for this special edition of Bloomberg Daybreak. 0:00:05.480 --> 0:00:08.360 I'm Nathan Hager. The US market is closed for the 0:00:08.400 --> 0:00:11.560 Thanksgiving Day holiday. Coming up this hour, we will look 0:00:11.560 --> 0:00:14.040 at how the retailers are doing as we approach the 0:00:14.080 --> 0:00:18.000 holiday shopping season beginning with Black Friday. Plus we'll get 0:00:18.040 --> 0:00:21.840 an update on some big antitrust cases, including the Justice 0:00:21.880 --> 0:00:26.560 Department's lawsuit against Google. Also, is there room for seconds 0:00:26.680 --> 0:00:30.000 at the Thanksgiving Feast? We'll look at the ozampic effect 0:00:30.520 --> 0:00:33.640 on the holiday meal. First, though, let's dig into what's 0:00:33.720 --> 0:00:37.760 driving the market and talk about oil, because crude has 0:00:37.840 --> 0:00:40.280 been on quite a ride. We've seen about a thirty 0:00:40.320 --> 0:00:42.800 dollars swing in the price of a barrel this year. 0:00:43.040 --> 0:00:45.320 There are a lot of factors at play, among them 0:00:45.479 --> 0:00:48.200 wars in Ukraine and the Middle East, and of course, 0:00:48.280 --> 0:00:51.360 the ongoing recovery from the pandemic. So for more on 0:00:51.400 --> 0:00:53.840 what's in store for the energy space, we have an 0:00:54.000 --> 0:00:57.520 expert roundtable set up for you. John Kilduff is with 0:00:57.640 --> 0:00:59.720 us on the phone. He is the founding partner at 0:00:59.720 --> 0:01:04.000 a Game Capital, and Stephen Shork is joining us on zoom. 0:01:04.040 --> 0:01:07.520 Stephen is president of the Short Group. Thanks to both 0:01:07.560 --> 0:01:09.480 of you for being with us on this holiday. And 0:01:09.520 --> 0:01:11.600 I'll start with you, John, because it wasn't that long 0:01:11.640 --> 0:01:13.880 ago we were talking about the return of one hundred 0:01:13.920 --> 0:01:16.800 dollars a barrel oil. Now we're quite a ways off 0:01:16.840 --> 0:01:17.240 from that. 0:01:17.880 --> 0:01:21.320 What happened, well, basically, the sum of our worst fears 0:01:21.319 --> 0:01:25.399 for the market just never materialized. With the initiation of 0:01:25.440 --> 0:01:28.720 the Ukraine War foot or was thought to put you know, 0:01:28.959 --> 0:01:31.840 meaningful amounts of Russian supplies of crude oil and refined 0:01:31.880 --> 0:01:34.520 products at jeopardy to be embargoed by the West, but 0:01:34.560 --> 0:01:37.400 they wouldn't be purchased. Meanwhile, they found a home almost 0:01:37.520 --> 0:01:40.440 mediately in China and India and Turkey to a lesser extent. 0:01:40.760 --> 0:01:44.720 And then you know, from there a similar situation here 0:01:44.800 --> 0:01:48.120 with situation in Gaza. Fears about you know, all kinds 0:01:48.120 --> 0:01:50.280 of a parade of horribles, about the straight of Hormos 0:01:50.280 --> 0:01:54.400 getting shut ran getting involved, and meanwhile, really the unfortunate 0:01:54.440 --> 0:01:59.200 situation has been very much contained to Gaza, no regionals 0:01:59.480 --> 0:02:03.160 still and certainly no threat to any supplies of oil. 0:02:03.560 --> 0:02:08.320 So once those geopolitical risk premiums dissolved, we're back to 0:02:08.400 --> 0:02:12.800 dealing with the relative even or oversupply and the worries 0:02:12.840 --> 0:02:15.960 about the main other factor in this market, which is demand, 0:02:16.280 --> 0:02:20.519 and China and the situation with their blackluster economy, their 0:02:20.560 --> 0:02:24.200 property market situation being deteriorating, and of course even Japan 0:02:24.320 --> 0:02:27.519 now showing significant economic weakness and demand for oil. 0:02:27.680 --> 0:02:30.240 Is that how you see things, Steven? Is risk premium 0:02:30.280 --> 0:02:32.480 off the table? Is there risk it returns? 0:02:32.880 --> 0:02:36.720 Yeah? Absolutely no. I'd never even thought risk premium was 0:02:36.760 --> 0:02:40.560 adequately priced in for the few days that we actually 0:02:40.560 --> 0:02:44.360 saw a pop post October seventh, So I am quite 0:02:44.400 --> 0:02:48.360 perplexed that there is no risk premium and in fact 0:02:48.480 --> 0:02:51.720 there's now a discount being priced into the market. It 0:02:51.840 --> 0:02:55.400 is just amazing to me that the market continues to 0:02:55.480 --> 0:02:58.560 ignore what is going on. This is a war, not 0:02:58.680 --> 0:03:02.960 between Israel and Hamas. This is not a military conflict, 0:03:02.960 --> 0:03:05.000 This is not a police action. This is a war. 0:03:05.440 --> 0:03:08.560 This is a war between Israel and let's face it, Iran. 0:03:09.440 --> 0:03:13.520 The Hamas has Belat, the Hutis have all declared war 0:03:13.639 --> 0:03:17.320 on Israel. I eat the West. So that is Iran. 0:03:17.800 --> 0:03:20.760 And the fact that we have forty percent of the 0:03:20.800 --> 0:03:24.200 world's waterborne oil that flows through a forty miles straight 0:03:24.320 --> 0:03:29.520 of Hormuz, and people refuse to factor that in. I 0:03:29.560 --> 0:03:33.919 think the market's taking a tremendous risk. So the theme 0:03:34.000 --> 0:03:37.400 coming into this year was China, China, China, to quote 0:03:37.440 --> 0:03:41.600 our jam Brady here, and with all of that demand 0:03:41.880 --> 0:03:45.800 and you know, China never never materialized. China quite frankly 0:03:45.880 --> 0:03:49.960 to me, looks like Japan's circuit early nineteen nineties. The 0:03:50.040 --> 0:03:52.600 curtain is being pulled back on that regime and on 0:03:52.720 --> 0:03:55.520 that economy. So now going into the new year, there 0:03:55.560 --> 0:04:00.520 are legitimate concerns whether it's China really the tiger of 0:04:00.520 --> 0:04:03.240 the Far East or is it now just a paper tiger. 0:04:03.320 --> 0:04:07.200 He raises an interesting point, John, is this market underpricing 0:04:07.360 --> 0:04:10.880 the potential for risk premium to return and what about 0:04:10.920 --> 0:04:13.200 the fundamentals going into twenty twenty four. 0:04:13.360 --> 0:04:15.240 Well, I think you would need to see a real 0:04:15.360 --> 0:04:17.760 escalation here. I mean for me, and I don't mean 0:04:17.800 --> 0:04:20.200 to be you know, anything less than you know this 0:04:20.240 --> 0:04:23.120 is a horrible situation. But look, Hamas kind of got 0:04:23.160 --> 0:04:27.560 left hanging by Iran and by you know, Hesbala in 0:04:27.560 --> 0:04:30.880 the north. The Hamas thought that these other parties would 0:04:30.920 --> 0:04:33.520 come in on their side and really make this the one, 0:04:34.000 --> 0:04:36.960 make this the situation. And if that had happened then 0:04:37.080 --> 0:04:39.440 what everything Stephen just said, and I would have been 0:04:39.520 --> 0:04:41.719 right on board with that. We would have had material 0:04:41.760 --> 0:04:44.919 amounts of crude oil at risk. And you know, for 0:04:45.000 --> 0:04:47.680 whatever reason that the calculation just wasn't there. I don't 0:04:47.680 --> 0:04:49.760 know whose miscalculation it was. It's saying it sounds like 0:04:49.800 --> 0:04:52.880 it was Hamas's because they're not getting the support right 0:04:52.920 --> 0:04:56.279 now that they expected. They're getting pin pricks sort of 0:04:56.600 --> 0:04:59.760 dust ups in various parts of Syria and other places 0:04:59.800 --> 0:05:02.320 by Iran which they're getting hit back with, but again 0:05:02.400 --> 0:05:06.760 no material amounts of oil. The fundamentals, though, are are interesting, 0:05:06.880 --> 0:05:08.560 and certainly it's going to it's hard to make an 0:05:08.640 --> 0:05:10.920 argument for prices to go much lower because of what 0:05:10.960 --> 0:05:13.520 the Saudi Arabia has been doing with their output policy 0:05:13.520 --> 0:05:16.720 and OPEC plus overall. Once again, o pech plus has 0:05:16.760 --> 0:05:19.800 fallen short of their lofty goals, but the Saudis haven't. 0:05:19.880 --> 0:05:23.040 They have delivered. They're only producing nine million barrels a day. 0:05:23.040 --> 0:05:25.440 Can you imagine that the United States produces thirty percent 0:05:25.520 --> 0:05:28.120 more oil right now than Saudi Arabia does. Yep, that's 0:05:28.160 --> 0:05:30.960 the case, and Sadi exports are down, so you know 0:05:31.040 --> 0:05:34.720 there's a potential for relative tightness emerging. But again, without 0:05:34.839 --> 0:05:38.720 China getting back into a groove of growth, it's hard 0:05:38.720 --> 0:05:40.920 to see prices materially going higher either. 0:05:41.120 --> 0:05:43.320 I think I hear you want to pop in there, Steven. 0:05:43.400 --> 0:05:46.520 What's your view on whether the Saudis continue with these 0:05:46.560 --> 0:05:48.599 supply cuts that we've seen over the last couple of months. 0:05:48.680 --> 0:05:51.679 Oh, yeah, no, No, I'm certainly on board with John 0:05:52.480 --> 0:05:56.039 with regard to offers, the geopolitics that it is a 0:05:56.040 --> 0:05:58.320 wait and see market, right. We know everyone knows that 0:05:58.440 --> 0:06:01.200 risk there, but for no one's willing to price it 0:06:01.240 --> 0:06:04.440 in and therefore we're going to have to wait. It 0:06:04.520 --> 0:06:08.200 certainly is a concern with Saudi Arabia. And let's keep 0:06:08.240 --> 0:06:13.599 in mind the sunny Saudis and the Shiah Persians don't 0:06:13.600 --> 0:06:17.400 necessarily agree on I mean, they really hate one another. 0:06:17.560 --> 0:06:20.760 I mean, let's be honest here, and the fact that 0:06:20.800 --> 0:06:23.600 the Saudis are doing what they can to keep prices 0:06:24.440 --> 0:06:26.800 higher with regard to production. Yeah, I do see that. 0:06:26.839 --> 0:06:29.520 I agree with John. I do see that going forward 0:06:29.520 --> 0:06:32.360 that they are sticking to their guns. And I think 0:06:32.360 --> 0:06:34.880 they're going to continue to stick to their guns because 0:06:35.120 --> 0:06:38.080 when we look at the spread action of difference between 0:06:38.160 --> 0:06:41.279 prices in the near term versus prices longer out along 0:06:41.320 --> 0:06:44.640 the curve. We're going into a situation where we're pricing 0:06:44.680 --> 0:06:47.000 on the front of the curve is signaling to the 0:06:47.040 --> 0:06:51.000 market that it is over supplied relative to demand. I 0:06:51.000 --> 0:06:53.159 want to say in crude oil. You're not seeing that 0:06:53.279 --> 0:06:57.040 dynamic playing out in gasoline, which is very interesting because 0:06:57.080 --> 0:07:01.200 gasoline demand is strong as we know for this holiday 0:07:01.720 --> 0:07:04.799 we're looking at one of the strongest holiday seasons since well, 0:07:04.839 --> 0:07:08.839 certainly in the post COVID start, and so the gas 0:07:08.880 --> 0:07:10.960 lien spreads of tightening, so there seems to be some 0:07:11.120 --> 0:07:14.120 concern with regard to supply in that manner, but the 0:07:14.160 --> 0:07:17.080 overall global market when we see how the spreads have 0:07:17.240 --> 0:07:20.600 really started to come down the front end. OPEK watches 0:07:20.680 --> 0:07:24.320 this stuff, so the formation of the forward curve is 0:07:24.480 --> 0:07:29.200 very important. I'm friends and I work with OPEK. I 0:07:29.240 --> 0:07:32.920 do know they put a lot of emphasis on this. Therefore, 0:07:33.080 --> 0:07:36.720 with the spreads collapsing with Saudi Arabia, if they're going 0:07:36.800 --> 0:07:38.960 to make any move would probably in the new year. 0:07:39.000 --> 0:07:41.360 If the spread state their way, they are, they'll probably 0:07:41.440 --> 0:07:46.520 cut rather than add production. Going into twenty twenty four, is. 0:07:46.440 --> 0:07:48.560 That how you see it as well, John? And if 0:07:48.600 --> 0:07:51.360 Saudi Arabia does continue to cut, does the rest of 0:07:51.360 --> 0:07:52.400 OPEK plus follow? 0:07:52.880 --> 0:07:55.960 The Sadi's have certainly put their shoulder to the wheel 0:07:55.960 --> 0:08:01.200 here that the energy minister Mahan Bensaman, as you know, 0:08:01.480 --> 0:08:04.520 delivered lollipops, and they want a higher price. You know, 0:08:04.560 --> 0:08:07.960 they need to pay for Neome and their other aspirations 0:08:08.440 --> 0:08:11.200 for their country, and they want oil prices closer to 0:08:11.240 --> 0:08:14.240 one hundred. The question I have though, is that are 0:08:14.240 --> 0:08:16.520 we getting closer to the cycle, the point in the 0:08:16.560 --> 0:08:19.920 cycle where the Saddies throw a fit again like they 0:08:19.920 --> 0:08:23.080 did back in two thousand, right before excuse me, twenty twenty, 0:08:23.160 --> 0:08:26.440 right before COVID hit and flooded the market to collapse 0:08:26.480 --> 0:08:29.040 the price to try to squeeze out higher cost producers, 0:08:29.040 --> 0:08:31.880 which they're kind of suffering from right now. Part of 0:08:31.920 --> 0:08:34.200 their problem is the United States with the twelve million 0:08:34.200 --> 0:08:36.800 barrels per day of production and about five million barrels 0:08:36.800 --> 0:08:39.560 per day we're pushing on it anyway of daily crude 0:08:39.559 --> 0:08:42.800 oil exports, so we're making their job a lot harder. 0:08:42.960 --> 0:08:45.520 As the years go by. Here, we'll see if that persists. 0:08:45.880 --> 0:08:48.280 But I do believe the Sattis want higher prices, and 0:08:48.320 --> 0:08:50.200 I do think they're willing to take one or more 0:08:50.240 --> 0:08:53.640 for the team to succeed in that endeavor, and so yes, 0:08:53.679 --> 0:08:55.480 and with Stephen on that that they're more than likely 0:08:55.559 --> 0:08:58.440 to cut right now until they finally throw that fit 0:08:58.679 --> 0:09:00.000 and collapse the market. 0:09:00.280 --> 0:09:04.280 Stephen, what about the impact of central banks and demand? 0:09:04.640 --> 0:09:10.560 Can prices grind higher when we could potentially see interest 0:09:10.640 --> 0:09:15.000 rates fall and the potential for a slow and demand 0:09:15.520 --> 0:09:18.520 depending on how this economy goes into twenty twenty four. 0:09:18.840 --> 0:09:23.160 Yeah, that is a really interesting point, and really I'm perplexed. 0:09:23.480 --> 0:09:26.760 I'm impressed with the US economy when we consider that 0:09:28.160 --> 0:09:31.559 consumer spending is seventy seventy zero percent of the economy, 0:09:31.600 --> 0:09:35.040 and we're looking at eighteen consecutive months of credit card 0:09:35.360 --> 0:09:39.320 debt well over one trillion dollars with interest rates on 0:09:39.400 --> 0:09:42.520 those credit cards at twenty two percent. When we look 0:09:42.520 --> 0:09:45.880 at savings rates that we've all gone through, all of 0:09:45.920 --> 0:09:48.640 the savings that we are the income or the cash 0:09:48.880 --> 0:09:50.760 that was printed by the US government, we no longer 0:09:50.760 --> 0:09:53.160 have those savings. So I don't know where where the 0:09:53.280 --> 0:09:56.480 juice from the consumer is coming from, but it's there. 0:09:56.880 --> 0:10:02.079 So certainly if we do seetea of if rate rises 0:10:02.280 --> 0:10:05.400 have indeed been cut, you know we've seen the end 0:10:05.440 --> 0:10:07.480 of it. I'm skeptical on that, but if we have, 0:10:07.800 --> 0:10:09.720 and to your point, if you do start to see 0:10:09.760 --> 0:10:13.280 interest rates coming back, well, heck, if the US consumer 0:10:13.640 --> 0:10:17.600 can spend in a twenty two percent credit card interest environment, 0:10:18.200 --> 0:10:21.760 you start bringing those down a few hundred bases points, 0:10:22.200 --> 0:10:25.920 then I can see this certainly being a catalyst that 0:10:25.920 --> 0:10:29.840 that will be that next trans next demand driver that 0:10:30.040 --> 0:10:33.080 can certainly propel oil prices higher into the new year. 0:10:33.280 --> 0:10:35.199 Thanks for this look at what could be driving oil 0:10:35.240 --> 0:10:39.120 prices into twenty twenty four. That was Stephen Schork, president 0:10:39.200 --> 0:10:43.239 of the Short Group, joining us on zoom and John Kilduff, 0:10:43.280 --> 0:10:46.679 founding partner at Again Capital, with us on the phone 0:10:46.760 --> 0:10:50.640 on this special Thanksgiving Day edition of Bloomberg Daybreak, and 0:10:50.679 --> 0:10:52.959 straight ahead we'll get you set for Black Friday. We'll 0:10:52.960 --> 0:10:56.200 look ahead to the holiday shopping season with Bert Flickinger 0:10:56.559 --> 0:11:00.480 of Strategic Resource Group. It's eighteen minutes past the I'm 0:11:00.520 --> 0:11:09.360 Nathan Hager, and this is Bloomberg. Welcome back to this 0:11:09.440 --> 0:11:13.040 special edition of Bloomberg Daybreak. The US markets are closed 0:11:13.040 --> 0:11:17.319 for the Thanksgiving holiday. I'm Nathan Hager and retailers, well, 0:11:17.360 --> 0:11:20.079 they're open and entering their most crucial time of the 0:11:20.160 --> 0:11:23.760 year for many. It has already begun with Black Friday 0:11:23.840 --> 0:11:27.760 sales underway. And for more on the kickoff of holiday 0:11:27.840 --> 0:11:32.680 shopping season, we welcome Bert Flickinger, Managing director at Strategic 0:11:32.760 --> 0:11:35.880 Resource Group. Bert, this time of year is always big 0:11:35.920 --> 0:11:40.440 for retail, but how big is this year's holiday shopping season, 0:11:40.480 --> 0:11:43.840 particularly when you think about companies like Walmart warning about 0:11:43.880 --> 0:11:46.000 the consumer outlook heading into next year. 0:11:46.679 --> 0:11:52.080 Nathan, Happy Thanksgiving Day, and there is some concerns with 0:11:52.200 --> 0:11:56.160 Walmart and everyone else that while retail sales will be 0:11:56.280 --> 0:11:58.320 up three to three and a half percent over the 0:11:58.360 --> 0:12:05.000 holiday season and this Black Friday weekend, overall, adjusted for inflation, 0:12:05.440 --> 0:12:08.600 sales are flat and on the Bloomberg terminal the University 0:12:08.640 --> 0:12:15.000 of Michigan consumer sentiments near twelvemonth low and that's all 0:12:15.400 --> 0:12:20.080 due to inflation and sixty percent of people going paycheck 0:12:20.120 --> 0:12:22.280 to paycheck and carrying a lot of consumer debt. 0:12:22.400 --> 0:12:24.280 So does that have you thinking that a lot of 0:12:24.320 --> 0:12:26.960 shoppers are going to be going into more of the 0:12:27.120 --> 0:12:30.719 lower end retail chains as opposed to some of the 0:12:30.800 --> 0:12:32.040 higher end locations. 0:12:32.280 --> 0:12:35.640 Yes, Nathan, the US Department of Commerce is reporting that 0:12:36.000 --> 0:12:41.880 anything's food based, like you said, Walmart, Costco, Kroger will 0:12:41.880 --> 0:12:46.719 do well. But the category dominant areas of the business, 0:12:47.360 --> 0:12:53.280 home improvement, furniture, sporting goods, electronics are all trending down, 0:12:53.600 --> 0:12:58.800 even not before they're adjusted for inflation. So the consumer spending, 0:12:58.840 --> 0:13:02.160 but the consumer's cast in my alma mater, Price Waterhouse 0:13:02.160 --> 0:13:05.600 Coopers said almost all the spending increases are coming from 0:13:05.640 --> 0:13:10.360 the top twenty percent of people in the disposable income ladder. 0:13:10.520 --> 0:13:12.199 So what does that mean when it comes to the 0:13:12.280 --> 0:13:16.160 kind of deals that we're used to seeing on Black Friday. 0:13:16.240 --> 0:13:18.240 If the thinking is that a lot of shoppers are 0:13:18.240 --> 0:13:20.800 looking more toward the lower end more of the staples, 0:13:20.840 --> 0:13:22.800 does that mean we're going to see deeper discounts on 0:13:22.840 --> 0:13:25.080 some of those like consumer tech items that you usually 0:13:25.080 --> 0:13:28.280 think about selling really well around Black Friday and beyond. 0:13:28.920 --> 0:13:32.920 Yes, you'll see better deals because Walmart, Target and others 0:13:32.960 --> 0:13:37.040 are still carrying ten to fifteen percent more inventory than 0:13:37.600 --> 0:13:42.720 they were pre pandemic, and all the retailers really started 0:13:43.040 --> 0:13:47.839 their Black Friday holiday sales programs either right after Labor 0:13:47.920 --> 0:13:51.400 Day or right after Columbus Day or Indigenous People's Day. 0:13:52.120 --> 0:13:53.960 So the deals have been out there for a long 0:13:54.000 --> 0:13:57.079 time and a lot of the people's shopping has already 0:13:57.080 --> 0:14:01.040 been done. So Price Waterhouse Coopers is saying about forty 0:14:01.120 --> 0:14:03.800 two percent of the shopping is going to be done online, 0:14:03.920 --> 0:14:07.960 forty one percent in store, and the remaining seventeen percent 0:14:08.040 --> 0:14:11.800 click and collect. But a lot of the shoppings been completed, 0:14:12.400 --> 0:14:15.520 except at Macy's with the Thanksgiving Day parade right near 0:14:15.559 --> 0:14:20.520 Bloomber's World headquarters doing well, and this is their big 0:14:20.600 --> 0:14:24.000 day is with the Macy's parade as Thanksgiving Day. 0:14:24.120 --> 0:14:26.480 Well, if so much of the shopping has already been 0:14:26.480 --> 0:14:31.280 done even before Black Friday, what kind of impact could 0:14:31.400 --> 0:14:34.120 some of these Black Friday discounts even have. 0:14:34.680 --> 0:14:40.000 Nathan's your excellent point to minimus impact because we're overstored 0:14:40.040 --> 0:14:43.280 in the suburbs and understored in the cities or the 0:14:43.400 --> 0:14:46.840 urban areas. So it's interestingly it's up to the Federal 0:14:46.880 --> 0:14:51.160 Trade Commission and exhibit A is letting Kroger and Albertson's 0:14:51.240 --> 0:14:54.920 merge to protect unionized employers and unionize jobs, and it 0:14:54.960 --> 0:14:58.640 was infirmed by John and Margot Katsmetitis from Cristiiti's and 0:14:58.720 --> 0:15:02.880 Dagostino after they and teammates gave out ten thousand turkeys. 0:15:02.920 --> 0:15:07.320 We talked to Democratic National Committee chair ed Rendell, Governor 0:15:07.440 --> 0:15:12.600 David Patterson, and Senator Malcolm Smith and John and Margot Katsmatitis, 0:15:13.080 --> 0:15:16.520 and they said it's really up to the government to 0:15:16.680 --> 0:15:20.440 let the chains, especially the Krogers of the world that 0:15:20.480 --> 0:15:24.320 are unionized, continue to operate and expand in the urban 0:15:24.360 --> 0:15:27.320 areas as well as suburban and rural areas because Walmart 0:15:27.560 --> 0:15:30.520 and Amazon have been subsidized in the city, and as 0:15:30.560 --> 0:15:34.240 soon as the government subsidies run out, Walmart tends to 0:15:34.280 --> 0:15:38.720 close and exit the urban areas, as they did ignominiously 0:15:39.880 --> 0:15:43.680 in the South and West side of Chicago before this 0:15:44.400 --> 0:15:46.160 twenty twenty three holiday season. 0:15:46.560 --> 0:15:50.520 Speaking with Bert Flickinger, the managing director of Strategic Resource Group, 0:15:51.000 --> 0:15:55.200 how do you expect this particular holiday shopping kickoff to 0:15:55.360 --> 0:16:00.280 compare two years past when we think about so much 0:16:00.280 --> 0:16:04.880 of the consumer running out of excess savings relying more 0:16:04.960 --> 0:16:07.280 on credit cards. How is that going to play out 0:16:07.600 --> 0:16:10.720 when it compares to some past Black Fridays. 0:16:11.320 --> 0:16:15.240 As it plays out, Nathan, it's by now pay later. 0:16:15.760 --> 0:16:21.240 PwC said that fifteen percent of the purchases for this 0:16:21.880 --> 0:16:26.120 Black Friday weekend and small business Saturday and two days 0:16:26.120 --> 0:16:28.960 and Cyber Monday and four days, it's going to be 0:16:29.160 --> 0:16:33.120 buy now, pay later. Fifteen percent of all purchases will 0:16:33.160 --> 0:16:36.720 be that way. And consumers are still taking on credit 0:16:36.720 --> 0:16:41.080 card debt, but sixty three percent of consumers will be 0:16:41.160 --> 0:16:45.440 buying with debit cards, so instant cash to the retailers 0:16:45.760 --> 0:16:48.600 and trying to put less on credit. As interest rates 0:16:48.600 --> 0:16:52.560 of climbed and the average household has seventeen thousand and 0:16:52.640 --> 0:16:54.600 revolving unpaid credit card debt. 0:16:54.800 --> 0:16:58.720 What's the read through to retailer's bottom lines their profit margins. 0:16:58.720 --> 0:17:01.560 If we do see more consumers relying on buy now, 0:17:01.560 --> 0:17:02.280 pay later. 0:17:02.720 --> 0:17:08.800 The retailer's bottom lines will be under pressure because about 0:17:08.880 --> 0:17:13.080 three percent of consumers are defaulting on credit card debt 0:17:13.119 --> 0:17:18.040 of some sort car loans, retail credit card debt, etc. 0:17:18.440 --> 0:17:24.760 So retailers will have a solid sales season flat adjusted 0:17:24.760 --> 0:17:29.639 for inflation, profit will be good but not great. But 0:17:29.680 --> 0:17:33.359 the real concern is the upcoming calendar year going into 0:17:33.400 --> 0:17:35.800 the election cycle of twenty twenty four. 0:17:36.080 --> 0:17:39.800 Yeah, I did want to get into what this holiday 0:17:40.119 --> 0:17:45.919 shopping season kickoff means in terms of momentum for retailers. 0:17:46.160 --> 0:17:49.879 Do you see the momentum growing for retailers once we 0:17:49.920 --> 0:17:53.600 get past this season or are there further headwinds. 0:17:53.520 --> 0:17:58.679 The momentums growing? And interestingly, Nathan, part of it is 0:17:59.640 --> 0:18:03.199 following the Bloomberg terminal. If a company like Bedbath and 0:18:03.240 --> 0:18:08.119 Beyond files for bankruptcy or Toys r Us earlier filed 0:18:08.119 --> 0:18:10.760 for bankruptcy and liquidation, who picks up the business? So 0:18:10.840 --> 0:18:14.000 Macy's and Target have done a terrific job picking up 0:18:14.640 --> 0:18:18.159 the toy business, especially Macy's, which on the Bloomberg Terminal 0:18:18.240 --> 0:18:22.760 reported very good earnings. It's so expensive to feed a 0:18:22.800 --> 0:18:27.600 family of four for over fifty dollars at McDonald's that 0:18:27.800 --> 0:18:32.120 for the first first time in decades, more people are 0:18:32.160 --> 0:18:38.160 buying food at Walmart, Kroger, Costco and cooking and entertaining 0:18:38.200 --> 0:18:42.919 at home because it's unaffordable to go out. So that 0:18:43.200 --> 0:18:47.760 shift in terms of consumers regardless of income, are all 0:18:47.760 --> 0:18:52.439 smart shoppers, and they're shopping more to buy and serve 0:18:52.560 --> 0:18:56.200 and stay at home rather than go out. Where our 0:18:56.240 --> 0:18:59.760 family was one of the largest food service suppliers to 0:18:59.800 --> 0:19:03.560 the restaurant industry and the food service restaurant industry. Nathan 0:19:03.600 --> 0:19:06.679 marks up the food about three hundred percent, marks up 0:19:06.680 --> 0:19:11.400 the beverages about seven hundred percent. First fifteen dollars big 0:19:11.480 --> 0:19:15.000 mac meal at McDonald's. That same meal could be bought 0:19:15.280 --> 0:19:20.840 at Kroger, Costco or Walmart for about a dollar per person. 0:19:21.200 --> 0:19:23.840 So just quickly, it looks like we're hearing a lot 0:19:23.960 --> 0:19:27.080 more thinking about, a lot more picking and choosing for 0:19:27.119 --> 0:19:29.680 this holiday shopping season perhaps than the years past. 0:19:30.600 --> 0:19:37.920 Yes, a lot more cautious, careful shopping. But ultimately, retail 0:19:38.000 --> 0:19:42.440 has gone from four hundred percent overstored fifteen years ago 0:19:42.520 --> 0:19:45.520 to only about one hundred percent overstored. And in the 0:19:45.640 --> 0:19:51.600 urban areas we're twenty to thirty to sometimes forty percent understored. 0:19:51.920 --> 0:19:56.840 So the big opportunities urban retail, and that's where Kroger 0:19:56.880 --> 0:20:01.280 and the unionized companies to locally, Christie and Augustinos and 0:20:01.320 --> 0:20:05.119 Morton Williams and fair Way have done it particularly well. 0:20:05.720 --> 0:20:08.280 All right, Berd Flick and thanks for this. It's Bird 0:20:08.320 --> 0:20:12.040 Flick and Jert managing partner at Strategic Resource Group, and 0:20:12.119 --> 0:20:15.200 still ahead on this Thanksgiving edition of Bloomberg day Break, 0:20:15.240 --> 0:20:18.520 We'll take the pulse of some key antitrust cases in 0:20:18.560 --> 0:20:22.240 a busy year for the Justice Department against corporate America. 0:20:22.480 --> 0:20:25.320 It's thirty five minutes past the hour. I'm Nathan Hager, 0:20:25.520 --> 0:20:34.439 and this is Bloomberg. Welcome back to this special Thanksgiving 0:20:34.600 --> 0:20:38.399 edition of Bloomberg Daybreak. I'm Nathan Hager. Us markets are 0:20:38.480 --> 0:20:41.640 closed for the holiday. Twenty twenty three has been a 0:20:41.760 --> 0:20:44.919 very busy year for the Justice Department. It's in the 0:20:44.920 --> 0:20:48.080 middle of a number of high profile trials aimed at 0:20:48.080 --> 0:20:52.000 limiting consolidation in corporate America. So who better to get 0:20:52.080 --> 0:20:55.840 you caught up on these cases than Bloomberg Intelligence Senior 0:20:55.920 --> 0:20:59.480 Litigation analyst Jennifer reed. Jen thanks for being with us 0:20:59.560 --> 0:21:01.680 on this holiday, taking a bit of a break from 0:21:01.680 --> 0:21:04.720 what has been a very busy time for you, particularly 0:21:05.080 --> 0:21:10.239 thinking about Google and these cases against that company and 0:21:10.320 --> 0:21:13.040 its parent Alphabet. Let's start with the one that's been 0:21:13.040 --> 0:21:15.400 going on for quite a while, with the Justice Department 0:21:15.400 --> 0:21:18.720 taking on Google over its dominance in search. What are 0:21:18.760 --> 0:21:20.440 the allegations there? Where do things stand? 0:21:20.560 --> 0:21:22.600 Yeah, that is a big one, and some are even 0:21:22.640 --> 0:21:25.679 calling that one the antitrust trial of the century. I 0:21:25.720 --> 0:21:27.679 don't know if when all is said and done, all 0:21:27.680 --> 0:21:29.520 that fanfare is going to be worth it. But this 0:21:29.560 --> 0:21:34.080 trial just ended November sixteenth, but closing arguments aren't set 0:21:34.160 --> 0:21:36.240 until early May, so it's going to be some time 0:21:36.280 --> 0:21:39.680 before Yeah. Really, this judge is taking it very seriously. 0:21:39.880 --> 0:21:42.399 There was a lot of evidence introduced in the trial, 0:21:42.440 --> 0:21:44.439 and I think he's going to carefully parse through it 0:21:44.480 --> 0:21:48.400 all before making any decisions and having those closing arguments. 0:21:48.680 --> 0:21:51.600 But here what the DOJ has accused Google of doing 0:21:51.720 --> 0:21:54.760 is illegally maintaining a monopoly in search and a couple 0:21:54.840 --> 0:21:58.679 different search advertising markets because they have these agreements with 0:21:58.800 --> 0:22:02.399 Apple and makers of Android mobile devices where they're spending 0:22:02.400 --> 0:22:05.280 a lot of money twenty six billion you heard in 0:22:05.320 --> 0:22:08.200 twenty twenty two for Google Search to be said is 0:22:08.240 --> 0:22:10.560 the default. So what it means is that if somebody 0:22:10.560 --> 0:22:12.439 buys a phone, they buy an Android phone, and you 0:22:12.520 --> 0:22:14.760 go right in and you go into Safari. Let's say 0:22:15.280 --> 0:22:17.480 Google is set as your default, whether you know it 0:22:17.600 --> 0:22:19.199 or not, whether you like it or not, and you 0:22:19.240 --> 0:22:21.240 do your search and that's what you're using. And so 0:22:21.320 --> 0:22:23.439 they're able to then get all the revenue from the 0:22:23.480 --> 0:22:26.120 advertising that comes up from that search, and the DJ 0:22:26.280 --> 0:22:29.800 is basically saying, look, Google's tied up everything with these agreements, 0:22:29.960 --> 0:22:32.480 and if being in duc duc go can't get in there, 0:22:33.000 --> 0:22:35.800 you know they can't improve because you need the data 0:22:35.840 --> 0:22:37.919 to improve, and you get the data by having more 0:22:37.960 --> 0:22:40.280 and more people do a search on your service. 0:22:40.640 --> 0:22:43.520 And we've had in the course of this case a 0:22:43.560 --> 0:22:48.200 lot of numbers revealed almost reluctantly by the parties involved 0:22:48.200 --> 0:22:51.520 in how much has been spent to keep Google at 0:22:51.520 --> 0:22:54.359 the top of the search list. But when we have 0:22:54.600 --> 0:22:58.080 so much time between the end of the arguments and 0:22:58.480 --> 0:23:02.320 the closing ares in this case, what are we expecting 0:23:02.320 --> 0:23:05.520 from this judge after all this time pouring through all 0:23:05.560 --> 0:23:06.160 the evidence. 0:23:06.600 --> 0:23:09.679 You know, he said himself that he has absolutely no 0:23:09.840 --> 0:23:12.280 idea how he's going to rule, And I suppose that's 0:23:12.280 --> 0:23:14.639 what he should say, because he needs to spend the 0:23:14.720 --> 0:23:16.600 time to look at the precedent and look at all 0:23:16.640 --> 0:23:19.240 the evidence before he makes up his mind. I mean, 0:23:19.520 --> 0:23:23.160 my feeling is that I lean a bit here toward 0:23:23.200 --> 0:23:27.040 the DOJ. I think the DJ introduced really compelling evidence 0:23:27.320 --> 0:23:29.960 that it is very difficult for other search engines to 0:23:30.000 --> 0:23:33.040