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

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Speaker 1: my co host Matt Miller.

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

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

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

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

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Speaker 1: All right, let's talk tech. The tech geeks are out

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Speaker 1: in force today. MSFT put up some numbers. Let's bring

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Speaker 1: in anaag Ran and man Deep Singh, our tech analyst

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Speaker 1: at Bloomberg Intelligence. And we can't get rid of these guys.

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Speaker 1: They keep sticking around. So on, rog, let's start with

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Speaker 1: you Microsoft. I mean, this is a two trillion dollar

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Speaker 1: market cap company and stocks up seven percent today. Talk

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Speaker 1: to us first about the earnings and then second about activision.

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Speaker 3: Yeah, you know, Paul, you've known that I've liked this

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Speaker 3: company for many years. But frankly, going into the quota,

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Speaker 3: I was a little worded that they were going to

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Speaker 3: not only miss, but actually guide downwards. And the exact

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Speaker 3: opposite happened. Almost every major product category performed better compared

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Speaker 3: to last quarter, and you know, increasing revenue run rates,

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Speaker 3: So I have no words. I mean, they just blow

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Speaker 3: it out of the park.

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Speaker 1: Frankly, all right, activision. Activision is big, I mean sucks big.

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Speaker 2: Not hurting Microsoft, though, I should point out that, you know,

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Speaker 2: Microsoft was up like eight percent in the pre market trade.

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Speaker 2: Then the headline came across from the UK that the

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Speaker 2: regulator there is going to bigfoot this sixty nine billion

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Speaker 2: dollar purchase and Microsoft is still up seven percent.

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Speaker 3: Yeah, that's fair, but they are up on you know

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Speaker 3: numbers and not lets you know, not that it had

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Speaker 3: nothing to do with the you know, the acquisition in

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Speaker 3: our vue. But this is going to be a big

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Speaker 3: problem in terms of how this thing gets settled. Now,

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Speaker 3: it's going to be a lot of court fighting and

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Speaker 3: legal issues. And I mean this just shows that regulators

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Speaker 3: around the world don't want big tech companies to buy anything.

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Speaker 3: I mean, this is so basically buybacks, more buybacks.

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Speaker 1: I saw Jenary on Bloomberg Television. I get to see

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Speaker 1: what she said. What is Jenry, who was our was

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Speaker 1: our anti trust expert in Bloomberg Intelligence, What is she

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Speaker 1: saying about it?

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Speaker 3: She thinks it's just going to be an ongoing legal

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Speaker 3: battle to try to get this resolved. I mean, that's

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Speaker 3: it's just going to take a lot more time to

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Speaker 3: figure out. Microsoft not going to back down anytime, honoring.

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Speaker 2: Why does Microsoft need call of duty? You know, why

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Speaker 2: do they need activision which makes call of duty? Now

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Speaker 2: that they have AI powered bing?

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Speaker 3: Well, you've told me this many times that you know

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Speaker 3: the cloud gaming is not ready here right now, and

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Speaker 3: you know maybe it will be ready three to five

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Speaker 3: years from now, and the whichever company has more content

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Speaker 3: is going to be dominant, is going to be one

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Speaker 3: of the dominating force there. And gaming has been a

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Speaker 3: big part of Microsoft since southiat Okoba.

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Speaker 4: All right.

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Speaker 1: Mendeed, Meta platform slash Facebook in this studio stock is

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Speaker 1: up seventy seven year to date. I thought these guys

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Speaker 1: had a problem with costs going crazy on something like

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Speaker 1: called the metaverse, which I don't know what that is.

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Speaker 1: Advertisers pulling back because there's a recession. How did they

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Speaker 1: turn the narrative around here for meta.

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Speaker 5: Well, it is still driven by cost cuts. Nothing has

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Speaker 5: changed in terms of the top line expectations. I think

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Speaker 5: what Alphabet did yesterday was to la fears that, you know,

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Speaker 5: digital advertising was going down the cliff. I don't think

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Speaker 5: that's happening anymore. And look, there will be at pricing headminds.

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Speaker 5: Search is the most resilient, which is what the alphabet

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Speaker 5: number showed. I do expect some at pricing headminds in

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Speaker 5: the results tonight, But when you are cutting ten billion

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Speaker 5: dollars in costs, I think it's always a good story

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Speaker 5: to sell, given we know these models are so good

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Speaker 5: in terms of you know, throwing out free cash flow.

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Speaker 5: So that's what's driving the stock right now.

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Speaker 2: Does Google have a weakness here? I know they dominate

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Speaker 2: in search with something like ninety percent of the global

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Speaker 2: search market right and Microsoft they're being had like six

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Speaker 2: or seven percent. But now they've got this AI powered bing.

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Speaker 2: I used it this morning to ask what kind of

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Speaker 2: infrastructure upgrades are needed on the US electricity grid if

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Speaker 2: people start adopting a higher share of evs rather than

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Speaker 2: ic E cars. You asked chat, I asked bing in

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Speaker 2: one in one sent in one you know search query,

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Speaker 2: I said, what kind of infrastructure upgrade does the US

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Speaker 2: electric grid need if we start buying more and more evs?

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Speaker 1: And the and the and the.

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Speaker 2: And the AI chat bot came back with an incredibly

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Speaker 2: elegant UH and direct answer, citing three different sources saying, look,

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Speaker 2: we're gonna need one and a half to two trillion

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Speaker 2: dollars of infrastructure upgrades by twenty thirty just to maintain

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Speaker 2: the electric grid where it is today. That's incredibly smart.

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Speaker 2: Google couldn't do anything near that.

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Speaker 5: Well, they will be, and that's the risk when you

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Speaker 5: have a ninety percent share in search. It's like anything

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Speaker 5: that comes on the horizon is always an imminent threat.

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Speaker 5: So in this case, clearly.

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Speaker 2: But there's never been anything on the horizon before.

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Speaker 5: Well no, I would disagree because a lot of people

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Speaker 5: and companies have tried PageRank. They've tried to copy Google's algorithm,

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Speaker 5: but they've never been as good in search as Google.

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Speaker 5: And that's why that mode has been penetrable, because no

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Speaker 5: one has been as good in search. So clearly, this

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Speaker 5: is something new on the horizon. It has a lot

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Speaker 5: of promise. We think it's going to raise Google's cost

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Speaker 5: of revenue because the cost of infrastructure goes up. But

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Speaker 5: will it be as good and as simple to use

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Speaker 5: as Google Search. The answer so far is no, and

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Speaker 5: it hasn't heard their revenue, which is why search are

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Speaker 5: performed last night.

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Speaker 1: But Matt had a I can't believe Matt put that

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Speaker 1: query in.

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Speaker 5: That's pretty yes, And that's where the search market could

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Speaker 5: grow because now you could search in terms of you know,

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Speaker 5: long questions, which you weren't able to do before, and

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Speaker 5: you don't have to browse through the links that they showing.

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Speaker 5: You said, this is a better way to consume Internet

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Speaker 5: content because you can search in paragraphs like long queries.

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Speaker 1: And I just like liquor store near me. That was

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Speaker 1: man so Ana Rod talk to us about just tech

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Speaker 1: spending overall. I mean, you know, really over the last

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Speaker 1: fifteen twenty years, it's just it seems like it's never slowed.

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Speaker 1: You guys think you're smart, but reality is you're just

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Speaker 1: you're just behind this great tech wave. I mean, anybody

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Speaker 1: could do that. But now we actually have some headwinds

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Speaker 1: to tech spending. Where are we seeing some of those headwinds?

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Speaker 1: How pronounced are they How long do you think they'll

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Speaker 1: they'll persist?

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Speaker 3: See, before last night, I thought it would last by

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Speaker 3: the end of the year. But to be very honest,

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Speaker 3: after Microsoft, you know, we could already be at that

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Speaker 3: pivot at this point, and you know it will take

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Speaker 3: a few more couple of months more for us to

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Speaker 3: figure it out. I have no doubt that once all

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Speaker 3: of this thing you know, settles in next year or

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Speaker 3: whenever that you know twelve month period is over, we're

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Speaker 3: going to see a bounce back and a major bounce

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Speaker 3: back in growth rates. Because the shift or digital sift

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Speaker 3: to AI shift, all of these things is still in

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Speaker 3: such early innings that there is no reason for companies

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Speaker 3: not to spend on technology products.

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Speaker 2: Mandy.

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Speaker 1: I mean in your in the companies you cover, where

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Speaker 1: you seeing some of the biggest growth in tech spending.

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Speaker 1: Is there the next cloud out there? What's the next

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Speaker 1: big thing?

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Speaker 5: I think the next big thing is clearly large language

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Speaker 5: models and generative AI. That's what these generative AI, generative

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Speaker 5: generative AI, That's what Matt's query is about, you know,

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Speaker 5: in terms of looking at content that's out there on

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Speaker 5: the web and giving a smart long form results where

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Speaker 5: you don't have to go through different types of links.

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Speaker 5: And you can apply that concept with images, with different

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Speaker 5: types of content, so it's not just text based searches.

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Speaker 5: You can apply that framework to a lot of different

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Speaker 5: types and I think every company right now is tinkering

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Speaker 5: with it. Clearly there's a big infrastructure investment that and

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Speaker 5: Rog was alluding to. So that's going into that tech

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Speaker 5: spend is you have to upgrade your infrastructure. You can

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Speaker 5: use your existing data centers and run those queries and

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Speaker 5: that's a big, big tailwind for it spent.

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Speaker 2: I just asked Bing how much of a problem is

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Speaker 2: the rising rate environment in the United States for big

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Speaker 2: technology companies and their spending plans. And Bing says higher

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Speaker 2: interest rates can hurt growing tech companies in three ways. First,

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Speaker 2: they increase the cost of borrowing more money to expand

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Speaker 2: a business. That's bad news for high growth tech companies

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Speaker 2: which are burning cash with widening losses. Second, it reduces

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Speaker 2: long term estimates for a company's earnings and free cash flow. Third,

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Speaker 2: it slows down businesses cash flows and stunts their reinvestment

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Speaker 2: into innovation and growth prosperty.

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Speaker 1: Good good job being Men Deep Seeing on Around Rock

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Speaker 1: and a Bloomberg Intelligence.

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Speaker 6: You're listening to the team Ken's our live program Bloomberg

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Speaker 6: Markets weekdays at ten am Eastern.

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Speaker 4: On Bloomberg dot com, the iHeartRadio app.

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Speaker 6: you get your podcasts.

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Speaker 1: We have state of the art facilities, and we literally

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Speaker 1: met and I sit at a round table, which means

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Speaker 1: we can actually have rounds at tables with smart anamals.

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Speaker 1: We just did it with the tech geeks on our agrana,

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Speaker 1: Man Deep Sing from Bloomberg Intelligence, two of the best

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Speaker 1: on the street. Now we do it with the banks.

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Speaker 1: We have two other top analysts here, Herman Channey follows

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Speaker 1: the regional banks, Neil Sipes. He follows the big boy banks,

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Speaker 1: the money center banks, along with Alison Williams. We got

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Speaker 1: them here at our Bloomberg Interactive Broker studio. We're round

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Speaker 1: tabling this thing.

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Speaker 5: Herman.

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Speaker 1: Let's start with you're you're the problem child here in

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Speaker 1: the banking space at this First Republic thing. It's down

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Speaker 1: another gajillion percent today, it was down fifty percent yesterday.

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Speaker 1: Is this thing a going concern? Is this something that

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Speaker 1: the fdi SE has to come in and just say, okay,

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Speaker 1: we're in charge now.

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Speaker 2: Don't take going concern.

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Speaker 1: I just did. I just did.

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Speaker 7: At this point, the bank's running out of options. There's

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Speaker 7: been reports from Bloomberg that they're looking to sew up

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Speaker 7: to one hundred and fifty or one hundred billion dollars

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Speaker 7: in assets. Which I think it's going to be a

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Speaker 7: tough We talked about this earlier. They only have about

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Speaker 7: fourteen billion dollars capital and any sort of haircut is

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Speaker 7: going to eat in that capital, and so it's they

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Speaker 7: don't have a lot of good negotiating power at this point.

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Speaker 7: So it's we're gonna wait to see.

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Speaker 1: So what does the FDI see? How does that organization work?

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Speaker 1: How did they decide when to step Are they asked

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Speaker 1: to step in? Do they look at the situation say

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Speaker 1: we are stepping in?

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Speaker 2: How does that work? At this point?

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Speaker 7: The regulators are embedded into First Republic over I would

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Speaker 7: say the past few weeks a month or so, and

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Speaker 7: they're seeing all the numbers that are coming in in

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Speaker 7: terms of deposit outflow, in terms of how they're managing

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Speaker 7: the balance sheet, so that they have a pulse on

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Speaker 7: the situation. And it's really up to their determination that

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Speaker 7: if they want to come in and close the doors.

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Speaker 1: And Mat I want to bring in Neil Sipes. This

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Speaker 1: is a dude we hired as a summer associate in

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Speaker 1: Bloomberg Intelligence. Now he's pretty much running the whole place.

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Speaker 1: I mean, you know, so like Alison Williams, we love.

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Speaker 1: She's kind of the rock star. But my you know,

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Speaker 1: she's got people. You can't get through to her because

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Speaker 1: she's got people to kind of shielder. So now we've

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Speaker 1: got Neil Sypes. He's research chalnels covering some of the

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Speaker 1: bigger banks, and.

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Speaker 2: He studied in the great state of Ohio.

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Speaker 8: Is that you're a DA flyer, that's right, that's right,

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Speaker 8: one of the few.

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Speaker 2: I was right next door at Antioch College, not studying,

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Speaker 2: not studying.

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Speaker 1: Yeah, the University of Dayton, home of a great healthcare analyst,

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Speaker 1: former bi analyst Michael Manns. Now it's sit investments in Minneapolis.

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Speaker 1: So nice lineage there of good analyst, research channels, command

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Speaker 1: of Uniers of Dayton. You know, talk to us about

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Speaker 1: what we've seen some of the bigger banks here. How

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Speaker 1: are they performing in terms of just kind of the

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Speaker 1: core banking business as well as their capital markets businesses.

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Speaker 4: Yeah.

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Speaker 8: Sure, And I think it is a little bit of

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Speaker 8: a difference when you compare it with some of the

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Speaker 8: regional peers that have had more idiosyncratic issues for themselves.

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Speaker 8: And what we've seen is, you know, the larger banks

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Speaker 8: have been able to weather this storm a little bit

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Speaker 8: better than what you've seen at some of the regionals,

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Speaker 8: or at least stay out of the headlines in the

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Speaker 8: sense that they've been some of these have been the

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Speaker 8: beneficiaries of some of these deposit flights what we're seeing

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Speaker 8: across the industry. It's no question that deposits are on

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Speaker 8: the decline, but ultimately some of these have some of

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Speaker 8: these larger banks have much more diversified deposit franchises that

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Speaker 8: can weather these storms and ultimately have a more diversified

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Speaker 8: client base, which ultimately, you know, supports the businesses across

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Speaker 8: whether it's investment banking, asset management, wealth management, et cetera,

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Speaker 8: whereas some of these regionals are a little bit more narrow.

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Speaker 1: Now, I like your coverage. You go over some of

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Speaker 1: the smaller investment banks, and if I were to go

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Speaker 1: back to the banking world, that's where I would go

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Speaker 1: to the evercres, the moluses, maybe even ray j and

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Speaker 1: Stefel talk goes out some of those smaller regional investment banks.

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Speaker 1: How are they doing? How do they compete against the

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Speaker 1: JP Morgans and the Morgan Stanleys of the world.

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Speaker 8: Yeah, well, some of those boutique investment banks, they compete

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Speaker 8: specifically in the advisory space, and like you said, that's

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Speaker 8: the place you wanted to be. Maybe in twenty twenty one,

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Speaker 8: maybe not so much right now, as we've seen deal

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Speaker 8: activity pretty much on ice since the beginning of twenty

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Speaker 8: twenty two. Keep in mind we were coming off that

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Speaker 8: record twenty twenty one. But as we've seen interest rates rise,

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Speaker 8: we've seen economic expectations sour a little bit, it's become

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Speaker 8: a lot more difficult for deals to take place. Confidence

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Speaker 8: is lower, market sentiment is weak. When you have volatility,

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Speaker 8: it's a lot harder for buyers and sellers to come

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Speaker 8: together on a price, and ultimately that's going to be

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Speaker 8: an issue. Not to mention what we've seen with capital markets,

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Speaker 8: it's a lot more difficult and a lot more expensive

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Speaker 8: to raise.

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Speaker 2: That capital Herman in terms of First Republic, obviously, the

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Speaker 2: share price is in free fall right now, and it

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Speaker 2: had been grouped together with a number of other regional banks,

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Speaker 2: including pac West. Yesterday pack West was also decimated almost

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Speaker 2: it was down by like nine percent. Today I noticed

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Speaker 2: pac West bouncing like eighteen percent in the pre market

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Speaker 2: and it's up right now another six percent. Why is that?

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Speaker 2: Is it just that we thought, oh, maybe pack West

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Speaker 2: isn't a doom loop as well, and now we realize

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Speaker 2: they're okay.

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Speaker 7: Well, they reported numbers yesterday and had some really encouraging numbers,

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Speaker 7: specifically to deposits, and deposits were down twenty percent through

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Speaker 7: March twentieth. They had pre announced that mid quarter, and

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Speaker 7: at the end of the quarter deposits came back a

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Speaker 7: little bit, and then through Friday a deposits came back

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Speaker 7: more so. So the fear that that depositive flight was

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Speaker 7: happening with with PacWest has been alleviated a bit, similar

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Speaker 7: to what has happened with Western Alliance as well. So

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Speaker 7: it does seem like the issues really are focused on

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Speaker 7: First Republic.

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Speaker 2: Well, and look, PacWest had a fifty two week high

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Speaker 2: of about thirty bucks a year. They're down to ten,

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Speaker 2: so taken down by two thirds. First Republic had a

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Speaker 2: fifty two week high of one seventy right, and they're

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Speaker 2: trading for five dollars a year, much worse. But I

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Speaker 2: don't understand why yesterday's release prompted, you know, a fifty

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Speaker 2: percent drop and another thirty percent drop today. I mean, yes,

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Speaker 2: they had one hundred billion dollars of outflows in the

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Speaker 2: first three months, but they only had one point seven

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Speaker 2: percent of outflows in April, right, So it does look

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Speaker 2: like they stemmed the bleeding.

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Speaker 7: It looks like they stem the bleeding. But there's overly

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Speaker 7: reliance now on higher cost CDs. We're talking four and

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Speaker 7: a half five percent CDs that they have to rely on,

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Speaker 7: and also wholesale funding borrowing from the discount window, borrowing

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Speaker 7: from the FHLB that's costly as well. So where though

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Speaker 7: the costlyer funding is going to squeeze their margins and

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Speaker 7: spur negative earnings for the foreseeable future. So that's really

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Speaker 7: what a spooking folks.

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Speaker 2: Neil has it affected the companies that you cover. I mean,

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Speaker 2: it's quite different from Stefel and Evercore obviously First Republic,

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Speaker 2: but they have high net worth individual maybe they have

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Speaker 2: bankers from Stefel in Evercore that got their zero percent

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Speaker 2: mortgages there.

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Speaker 8: Yeah, it's it's definitely a different story for stephl and

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Speaker 8: Raymond James because when you think about these two institutions,

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Speaker 8: it's more so a wealth manager that owns a bank

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Speaker 8: rather than a bank that owns other division.

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Speaker 2: But I just mean, are there any knock on effects?

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Speaker 2: Are you hearing people from no doubt saying like hey,

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Speaker 2: I have a plan, or we're taking assets from them,

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Speaker 2: or you know.

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Speaker 8: Well for sure, I mean you've seen the flight of

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Speaker 8: some advisors from First Republic. When you have issues at

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Speaker 8: the underlying bank, at someone like First Republic, you ultimately

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Speaker 8: see the flight of some of those advisors and ultimately

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Speaker 8: those client assets to some of these other competitors. But

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Speaker 8: to be fair, the Stefil and Raymond James of the world,

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Speaker 8: they're also seeing the same issues of deposits perhaps shifting

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Speaker 8: between either lower cost bank accounts all the way up

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Speaker 8: to those money market funds that are ultimately leaving the

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Speaker 8: balance sheet. Steefeil, on one hand, has been very aggressive

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Speaker 8: in sharing that interest rate increase with its clients. Others

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Speaker 8: perhaps less so when you see those deposits leave the

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Speaker 8: balance sheet.

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Speaker 2: Herman Chan is such a rock stary.

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Speaker 1: He had to leave because TV beckond they want to

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Speaker 1: know what's going on the First Republic. So he just ran,

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Speaker 1: literally ran to the TV studio. When Antorres says, get

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Speaker 1: in studio, Yeah, get in studio. You do not mess around.

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Speaker 2: And Torres is a Bloomberg television producer to whom you

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Speaker 2: do not say no.

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Speaker 1: Exactly right. So Neil, again you follow some of these

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Speaker 1: regional investment banks, they focus really heavily on advisory work,

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Speaker 1: as you said, more so than capital markets. There ain't

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Speaker 1: no deals happening, man, What are they saying about the

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Speaker 1: m and A environment out there?

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Speaker 8: Yeah, and they're saying that there's not much happening. And unfortunately,

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Speaker 8: you know, back in January, we were hearing a little

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Speaker 8: bit of some positive comments of saying, look, markets had

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Speaker 8: turned around a little bit in the fourth quarter and

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Speaker 8: that was extending in the first quarter. So there were

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Speaker 8: some growing opportunities, some green shoots, so to speak. But

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Speaker 8: ultimately what they've said so far this quarter is March

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Speaker 8: pretty much canceled that out right, the volatility that we

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Speaker 8: saw around banks that spread across broader markets. Yes, we're

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Speaker 8: still up on the year, but that inherent volatility and

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Speaker 8: ultimately just the lack of clarity as to where monetary

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Speaker 8: policy is going to be, how the economy is going

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Speaker 8: to look, how inflation is trajecting throughout the rest of

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Speaker 8: the year. That's ultimately going to continue away on deal announcements,

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Speaker 8: which therefore ways on future fees.

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Speaker 1: You know, on a scale one to ten, ten being

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Speaker 1: the best. How was your experience at the University of Dayton.

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Speaker 8: Yeah, no, hesitation.

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Speaker 1: You're a big fan, right, yep?

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Speaker 8: Yeah. I mean I can't speak highly enough of it.

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Speaker 1: And you are you a high native?

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Speaker 4: I am not.

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Speaker 8: I'm a Connecticut native actually. Okay, So I did a

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Speaker 8: little quick trip to the Midwest and sort of came back.

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Speaker 8: But ultimately, I mean it's it's a great you know,

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Speaker 8: education there, and they have a student run investment fund yep,

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Speaker 8: and so they're able to, you know, kind of put

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Speaker 8: that hands on experience with analysis.

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Speaker 2: Did you ever get a milkshake at Young's Dairy Farm?

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Speaker 8: I did not. I'm not familiar with them.

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Speaker 2: Have you not be into Yellow Springs?

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Speaker 4: I have not.

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Speaker 8: Oh, I've driven through it.

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Speaker 2: I think he's all business, all the time, all business

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Speaker 2: all the the kids a day.

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Speaker 1: They're not out there playing around, they're studying, working hard.

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Speaker 1: Neil Sipes he's equity research channelist at Bloomberg Intelligence, homegrown,

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Speaker 1: home trained, and now he's a rockst Army. Appreciate getting

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Speaker 1: a few miutes just time to talk about some of

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Speaker 1: these banks.

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Speaker 6: Here you're listening to the tape. Cat's are Live program

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Speaker 6: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,

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Speaker 6: the tune in app, Bloomberg dot Com.

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Speaker 4: And the Bloomberg Business App.

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Speaker 6: You can also listen Love I Have on Amazon Alexa

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00:19:01,320 --> 00:19:04,600
Speaker 6: from our flagship New York station. Just say Alexa play

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Speaker 6: Bloomberg eleven thirty.

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Speaker 2: We're bringing now Christelle Rendu de Lin. She's the head

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Speaker 2: of investments at Fonto Bell normally in Zurich. She joins

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Speaker 2: us live in the Bloomberg Interactive Broker Studio. Great to

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Speaker 2: have you here, Christelle. Let me first ask you what

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Speaker 2: you make of these markets. You know, we saw so

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Speaker 2: much volatility in the first three months and it just

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Speaker 2: dropped down to nothing in April. Okay, yesterday we broke

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Speaker 2: out of the range a little on the stock side,

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Speaker 2: certainly not in fixed income. What's going on?

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Speaker 9: Well, I think, I mean, you just nailed it. We

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Speaker 9: are completely in the wait and see mode. The recession

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Speaker 9: has been spoken about for about a year and it

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Speaker 9: just is not materializing. It's very hard to find strong

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Speaker 9: positive news that would you know, put you on risk on.

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Speaker 9: But at the same time, you know you don't go

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Speaker 9: risk off because it's it is just not crumbling down

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Speaker 9: or certainly not as fast as people would have it.

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Speaker 2: So, I mean, we were all focused so much on

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Speaker 2: the FED. It was like Bloomberg surveillance twenty four to

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Speaker 2: seven here until this week. Really, all of a sudden

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Speaker 2: people started to care about caring about earnings and putting

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Speaker 2: FED you know, forecasts on the back burner. Do you

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Speaker 2: think we've shifted for good or are we going to

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Speaker 2: go back to our incredible macro focus, you know, as

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Speaker 2: soon as we get big economic data on Friday.

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Speaker 9: Yeah, I think it's too soon to write up the

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Speaker 9: macrol because actually this is the story. The earnings are

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Speaker 9: the realization of what's happening on the macro, and the

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Speaker 9: FED has a tough job now it's you know, inflation

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Speaker 9: is still there. They still need to go. But you

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Speaker 9: see the first cracks in the system. And the whole

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Speaker 9: question is, you know, are they just isolated cracks or

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Speaker 9: is it a sign of more to come? So I

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Speaker 9: think the story is quarely in the macro camp still.

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Speaker 1: So where do you guys have on topo come down

438
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Speaker 1: on this whole thing? I mean, I think the FED.

439
00:20:58,119 --> 00:21:00,280
Speaker 1: I guess the risk is the FED has gone to far,

440
00:21:00,400 --> 00:21:04,280
Speaker 1: will go too far and in fact break this economy.

441
00:21:04,480 --> 00:21:06,320
Speaker 1: Is that the side you've come down on. You think

442
00:21:06,320 --> 00:21:08,439
Speaker 1: there's a risk here that this is there's gonna be recession,

443
00:21:08,480 --> 00:21:10,040
Speaker 1: and it might be more than people are expecting.

444
00:21:10,400 --> 00:21:12,960
Speaker 9: Yeah, the house view is indeed that we will go

445
00:21:13,080 --> 00:21:17,960
Speaker 9: into into recession, not necessarily one that sees on employment

446
00:21:18,040 --> 00:21:21,080
Speaker 9: going to the roof, but one that will be enough

447
00:21:21,119 --> 00:21:25,080
Speaker 9: to stop the FED and potentially bring it onto a

448
00:21:25,160 --> 00:21:29,280
Speaker 9: rate cut cycle. I think personally it's too early to

449
00:21:29,320 --> 00:21:31,520
Speaker 9: go for that. I think they've got a job to

450
00:21:31,560 --> 00:21:34,399
Speaker 9: do and they just can't let go just now. But

451
00:21:34,440 --> 00:21:36,600
Speaker 9: we also history has told us that, let's say, if

452
00:21:36,600 --> 00:21:39,919
Speaker 9: the cracks really materialize, they're gonna take this.

453
00:21:39,960 --> 00:21:42,240
Speaker 2: It's gonna be difficult for the FED to stand up

454
00:21:42,520 --> 00:21:45,400
Speaker 2: to the political pressure. Nonetheless, it does look like they're

455
00:21:45,400 --> 00:21:49,560
Speaker 2: going well, certainly twenty five basis points more next week. Right,

456
00:21:49,640 --> 00:21:52,600
Speaker 2: do you expect an increase after that? Because inflation looks

457
00:21:52,600 --> 00:21:56,400
Speaker 2: pretty sticky, and Jerome Powell, if you take him as word,

458
00:21:56,400 --> 00:21:58,840
Speaker 2: he is determined to break the back of inflation.

459
00:21:59,080 --> 00:22:02,360
Speaker 9: Look, I think the sign for me it hasn't changed

460
00:22:02,400 --> 00:22:05,919
Speaker 9: that they'd like to do as little as possible so

461
00:22:05,960 --> 00:22:08,239
Speaker 9: that they don't break the economy. But they will have

462
00:22:08,359 --> 00:22:11,240
Speaker 9: to do as much as needed to show that inflation

463
00:22:11,320 --> 00:22:13,919
Speaker 9: has turned around. And so at the point that the

464
00:22:13,960 --> 00:22:16,920
Speaker 9: Fed can say this is it, guys, you see inflation

465
00:22:17,080 --> 00:22:20,919
Speaker 9: has durably peaked, then they will step off the pedal.

466
00:22:21,000 --> 00:22:22,520
Speaker 2: But when is that? You know, when he has a

467
00:22:22,560 --> 00:22:26,720
Speaker 2: press conference, reporters are trying to needle him to get

468
00:22:26,760 --> 00:22:29,320
Speaker 2: him to say something. He just wants to get close

469
00:22:29,400 --> 00:22:33,800
Speaker 2: to two. But does that mean three? Does that in four? Yeah?

470
00:22:33,840 --> 00:22:35,800
Speaker 9: I think they just I think they probably just don't

471
00:22:35,840 --> 00:22:37,960
Speaker 9: know when that is, you know, when we've really reached

472
00:22:37,960 --> 00:22:40,680
Speaker 9: the peak. I don't think it will be a question level.

473
00:22:40,760 --> 00:22:43,600
Speaker 9: I think it will be a question of really seeing, Okay,

474
00:22:43,680 --> 00:22:46,520
Speaker 9: we can now say the peak is behind us. They've

475
00:22:46,600 --> 00:22:49,600
Speaker 9: done five hundred basis point one shot. That's one of

476
00:22:49,600 --> 00:22:52,480
Speaker 9: the fastest tightening cycles. You've got a few cracks here

477
00:22:52,480 --> 00:22:55,720
Speaker 9: and there. I think when they can stop, they will,

478
00:22:56,040 --> 00:22:58,760
Speaker 9: But they want if inflation has not topped.

479
00:22:59,280 --> 00:23:01,439
Speaker 1: All right, So what are you telling you're coming? You're

480
00:23:01,440 --> 00:23:03,240
Speaker 1: here in New York, first time you said in almost

481
00:23:03,240 --> 00:23:05,920
Speaker 1: a decade. Yeah, so you're meeting with I'm guessing, shame

482
00:23:05,960 --> 00:23:08,520
Speaker 1: on me in special investors here in New York. You

483
00:23:08,560 --> 00:23:10,280
Speaker 1: sit down with some of the big players here in

484
00:23:10,320 --> 00:23:12,840
Speaker 1: New York. What are you telling them to do in

485
00:23:12,920 --> 00:23:15,160
Speaker 1: terms of, you know, investments over the next six, twelve,

486
00:23:15,200 --> 00:23:15,680
Speaker 1: eighteen months.

487
00:23:15,760 --> 00:23:17,520
Speaker 9: So the first thing I tell them is always the

488
00:23:17,520 --> 00:23:21,000
Speaker 9: same thing, is just to start with not only to

489
00:23:21,000 --> 00:23:23,840
Speaker 9: think about investment views, but about the portfolio construction. This

490
00:23:24,000 --> 00:23:26,879
Speaker 9: is the one thing that is never talked about is

491
00:23:26,960 --> 00:23:29,199
Speaker 9: if you get it wrong in your risk appetite, it's

492
00:23:29,240 --> 00:23:31,440
Speaker 9: going to be wrong anyway. So that's the first thing.

493
00:23:31,440 --> 00:23:34,840
Speaker 9: Where's your own risk appetite and tolerance to risk? And

494
00:23:34,920 --> 00:23:38,240
Speaker 9: I would go balanced, to be honest, It's not for me.

495
00:23:38,320 --> 00:23:41,080
Speaker 9: It's not an environment you go all cash unless you

496
00:23:41,200 --> 00:23:43,480
Speaker 9: think all hell, you know it's going to break loose,

497
00:23:43,560 --> 00:23:46,840
Speaker 9: and I don't think we're there. So I don't have equity,

498
00:23:47,000 --> 00:23:49,080
Speaker 9: I don't have fixed income, And I actually think the

499
00:23:49,680 --> 00:23:53,680
Speaker 9: big change is that Treasury will be back in town

500
00:23:53,920 --> 00:23:57,440
Speaker 9: as a safe haven play. They haven't played their role

501
00:23:57,520 --> 00:24:00,680
Speaker 9: last year for obvious reasons, but they will be back.

502
00:24:00,920 --> 00:24:03,720
Speaker 2: You think investors worried about a recession are going to

503
00:24:03,800 --> 00:24:06,440
Speaker 2: pile back in. I think is that going to drive

504
00:24:06,520 --> 00:24:07,240
Speaker 2: rates down?

505
00:24:07,840 --> 00:24:09,520
Speaker 9: I don't think they're gonna apply by kin, but I

506
00:24:09,520 --> 00:24:11,840
Speaker 9: think they're not there, and so if we do get

507
00:24:11,880 --> 00:24:14,119
Speaker 9: a recession, we're going to get a serious rady on

508
00:24:14,200 --> 00:24:18,080
Speaker 9: those rates because people I'm not in and I think

509
00:24:18,119 --> 00:24:20,000
Speaker 9: that makes them will still be at plate.

510
00:24:20,440 --> 00:24:22,560
Speaker 2: I wonder what you think about You are an economist.

511
00:24:22,680 --> 00:24:24,960
Speaker 2: You got your PhD at the London School of Economics.

512
00:24:25,760 --> 00:24:26,320
Speaker 1: That's good.

513
00:24:26,359 --> 00:24:29,520
Speaker 2: We have rates that, you know, relative to the levels

514
00:24:29,560 --> 00:24:33,480
Speaker 2: we saw in the eighties, for example, don't look very high.

515
00:24:33,560 --> 00:24:35,959
Speaker 2: But we didn't have this kind of debt load in

516
00:24:36,000 --> 00:24:40,000
Speaker 2: the eighties. Right if you have to refinance, you know,

517
00:24:40,680 --> 00:24:44,600
Speaker 2: today's debt versus debt back then, it's way more painful.

518
00:24:44,760 --> 00:24:47,080
Speaker 2: Right at the US is now at what one hundred

519
00:24:47,119 --> 00:24:50,520
Speaker 2: and twenty percent debt to GDP. Back in the early eighties,

520
00:24:50,600 --> 00:24:53,520
Speaker 2: we were like twenty percent debt to GDP, So five

521
00:24:53,560 --> 00:24:56,760
Speaker 2: percent now hurts a lot more than maybe seventeen percent

522
00:24:56,840 --> 00:25:01,639
Speaker 2: then did Is that gonna change the the equation?

523
00:25:02,280 --> 00:25:04,040
Speaker 9: Yeah, I think it's going to change the equation, And

524
00:25:04,080 --> 00:25:06,360
Speaker 9: I think that's the reason we will not get back

525
00:25:06,400 --> 00:25:09,280
Speaker 9: to the inflation rates that we've had for the last

526
00:25:09,280 --> 00:25:09,840
Speaker 9: twenty years.

527
00:25:09,920 --> 00:25:11,600
Speaker 2: We're not going back to I don't think so.

528
00:25:11,880 --> 00:25:13,760
Speaker 9: I don't think so. I don't think so and you

529
00:25:13,800 --> 00:25:17,040
Speaker 9: know what I mean, two percent was chosen. It was chosen.

530
00:25:17,119 --> 00:25:19,119
Speaker 9: It can't be ten, it can't be six. But does

531
00:25:19,200 --> 00:25:20,040
Speaker 9: it have to be two?

532
00:25:20,760 --> 00:25:21,400
Speaker 2: I'm not sure.

533
00:25:21,480 --> 00:25:22,840
Speaker 9: I mean we can live with three.

534
00:25:22,680 --> 00:25:22,959
Speaker 4: All right.

535
00:25:23,000 --> 00:25:26,080
Speaker 1: Christa, you're based in Zurich, you're from Geneva, so you

536
00:25:26,119 --> 00:25:29,240
Speaker 1: are Swiss all the way through. What does it mean

537
00:25:29,600 --> 00:25:34,240
Speaker 1: to an average Swiss citizen that ubs acquired credit? Swiss

538
00:25:34,320 --> 00:25:37,040
Speaker 1: people are telling people are telling me it's a big

539
00:25:37,080 --> 00:25:39,639
Speaker 1: deal for the average Swiss person.

540
00:25:39,960 --> 00:25:42,040
Speaker 9: Well, it is a big deal, yeah, because it's the

541
00:25:42,080 --> 00:25:46,120
Speaker 9: two largest banks getting together. So firstly, you know, you'd

542
00:25:46,200 --> 00:25:50,760
Speaker 9: wish it hadn't happened. But secondly, the most important was,

543
00:25:50,920 --> 00:25:55,440
Speaker 9: as always to stabilize market, and that was absolutely key.

544
00:25:55,560 --> 00:25:58,160
Speaker 9: You know it from here as well. You cannot let

545
00:25:59,240 --> 00:26:03,199
Speaker 9: crisis of confidence get get in the way. But I

546
00:26:03,240 --> 00:26:04,840
Speaker 9: think the ink is not dry on all of that.

547
00:26:04,920 --> 00:26:08,159
Speaker 1: People are angry, right, people are angry. Angry.

548
00:26:08,600 --> 00:26:11,080
Speaker 9: Well, they're angry because you know, all of that happened

549
00:26:11,200 --> 00:26:14,840
Speaker 9: very quickly in a sense, so the the government's decisions

550
00:26:14,920 --> 00:26:17,080
Speaker 9: happened very quickly, and so you hear a lot of

551
00:26:17,240 --> 00:26:20,200
Speaker 9: political voices saying, you know, we want that you look

552
00:26:20,240 --> 00:26:22,879
Speaker 9: into the competition laws and and and things like that.

553
00:26:23,080 --> 00:26:24,320
Speaker 9: So I think we we.

554
00:26:26,720 --> 00:26:28,960
Speaker 1: Are lots of banks or but these are the two

555
00:26:29,160 --> 00:26:31,760
Speaker 1: big ones. These are There's nothing else like that, There's

556
00:26:31,760 --> 00:26:36,680
Speaker 1: not I mean, so this is really level.

557
00:26:36,760 --> 00:26:41,639
Speaker 2: It's just is do you like Zermatt or Saint Maurritz? Like,

558
00:26:41,680 --> 00:26:44,080
Speaker 2: where's the best place to ski for you? East side?

559
00:26:44,080 --> 00:26:44,680
Speaker 2: West side?

560
00:26:46,040 --> 00:26:48,280
Speaker 9: God, that is a really difficult one. You know, I'm

561
00:26:48,280 --> 00:26:51,399
Speaker 9: a mad person, but since I've moved to Zurich, I

562
00:26:51,440 --> 00:26:54,440
Speaker 9: have to say the anger in is wonderful as well.

563
00:26:54,600 --> 00:26:57,240
Speaker 9: So I'm gonna draw my joker card.

564
00:26:57,320 --> 00:26:59,119
Speaker 2: There's a good question.

565
00:26:59,200 --> 00:27:01,600
Speaker 1: Yeah, I mean, just so many choices there in Switzer

566
00:27:01,720 --> 00:27:04,080
Speaker 1: met We got a road trip this. Yes, we do

567
00:27:04,200 --> 00:27:07,320
Speaker 1: a remote broadcast from Zurich a couple of days Geneva

568
00:27:07,400 --> 00:27:09,359
Speaker 1: couple days start.

569
00:27:09,560 --> 00:27:10,400
Speaker 2: I'll put the tick.

570
00:27:10,400 --> 00:27:12,800
Speaker 9: Days and we'll hoast you up from Tobol.

571
00:27:12,960 --> 00:27:17,160
Speaker 1: You see your guests absolutely. Christo Rendu Day Lindt, head

572
00:27:17,160 --> 00:27:19,760
Speaker 1: of investments for Von Tobel based in Zurich.

573
00:27:21,600 --> 00:27:25,000
Speaker 6: You're listening to the Team Ken's Our Line program Bloomberg

574
00:27:25,040 --> 00:27:28,480
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot com,

575
00:27:28,520 --> 00:27:31,640
Speaker 6: the iHeartRadio app, and the Bloomberg Business app or listen

576
00:27:31,720 --> 00:27:33,960
Speaker 6: on demand wherever you get your podcasts.

577
00:27:35,840 --> 00:27:38,520
Speaker 1: Sat down to Washington, DC, talk about not being comfortable.

578
00:27:38,520 --> 00:27:41,320
Speaker 1: We'll talk to Nathan Nathan Dean, he's a senior policy

579
00:27:41,320 --> 00:27:44,159
Speaker 1: house of Bloomberg Intelligence, as well as Emily Wilkins, reporter

580
00:27:44,240 --> 00:27:46,399
Speaker 1: for Bloomberg Government. They join us here to get the

581
00:27:46,440 --> 00:27:49,040
Speaker 1: latest from DC. Nathan, let's start with you here. What

582
00:27:49,119 --> 00:27:51,040
Speaker 1: does my Congress have to do here? I mean, we've

583
00:27:51,040 --> 00:27:53,480
Speaker 1: got to continue to pay our bills and you know

584
00:27:53,480 --> 00:27:56,760
Speaker 1: we're getting into May here. Give us just the latest

585
00:27:56,800 --> 00:27:58,560
Speaker 1: on this debt ceiling and all that kind of stuff.

586
00:27:58,800 --> 00:28:01,119
Speaker 10: Well, you know, so obviously you know, the House Republicans

587
00:28:01,119 --> 00:28:04,439
Speaker 10: are coming together with a bill. You know, voter is

588
00:28:04,520 --> 00:28:08,400
Speaker 10: expected later today. But you know, whether this bill passes

589
00:28:08,480 --> 00:28:11,159
Speaker 10: or not, you know, this is represents the first step

590
00:28:11,200 --> 00:28:13,280
Speaker 10: that I think the markets really want to see happen

591
00:28:13,320 --> 00:28:16,159
Speaker 10: in Washington, and that's negotiations. I mean, they want to

592
00:28:16,200 --> 00:28:18,480
Speaker 10: see Congress come together with the White House and get

593
00:28:18,520 --> 00:28:20,960
Speaker 10: this done. So you know, this is one of those

594
00:28:21,040 --> 00:28:23,840
Speaker 10: like chicken before you know, what comes first, the chicken

595
00:28:23,920 --> 00:28:26,480
Speaker 10: or the egg? You know, does Congress negotiate or does

596
00:28:26,480 --> 00:28:28,600
Speaker 10: the market freak out? And both are waiting for the

597
00:28:28,640 --> 00:28:32,360
Speaker 10: other to do something, and you know, at least Congress

598
00:28:32,400 --> 00:28:34,400
Speaker 10: is showing that they're doing something so the market can

599
00:28:34,440 --> 00:28:36,080
Speaker 10: actually start preparing for that.

600
00:28:37,359 --> 00:28:41,360
Speaker 2: Emily, let me ask you about the possibility of McCarthy's

601
00:28:41,360 --> 00:28:45,680
Speaker 2: plan passing. I thought, you know, as a no brainer.

602
00:28:45,760 --> 00:28:49,040
Speaker 2: The Republicans all want to be on, you know, one team,

603
00:28:49,160 --> 00:28:50,760
Speaker 2: and they're going to take it to the White House

604
00:28:50,800 --> 00:28:53,800
Speaker 2: with this plan. But now I hear that some Republicans

605
00:28:53,840 --> 00:28:58,360
Speaker 2: are balking because they want subsidies, which totally confuses me

606
00:28:58,440 --> 00:29:01,280
Speaker 2: because I grew up, you know, and Alex P. Keaton

607
00:29:01,400 --> 00:29:05,720
Speaker 2: card caring Republican, and I thought small government and no subsidies.

608
00:29:05,920 --> 00:29:08,640
Speaker 2: But why are Republican congressmen wanting to hold onto these

609
00:29:08,640 --> 00:29:10,320
Speaker 2: government handouts.

610
00:29:10,520 --> 00:29:12,760
Speaker 11: Because it's what's good for their district. A lot of

611
00:29:12,800 --> 00:29:15,440
Speaker 11: these lawmakers who want to see more of these tax

612
00:29:15,480 --> 00:29:18,320
Speaker 11: credits on round bile fuels, they come from places where

613
00:29:18,320 --> 00:29:20,400
Speaker 11: ethanol is a big deal because their districts grow a

614
00:29:20,400 --> 00:29:22,400
Speaker 11: ton of corn. You've got Nancy Mace, who has a

615
00:29:22,400 --> 00:29:25,800
Speaker 11: lot of solar producing companies in her district. She wants

616
00:29:25,840 --> 00:29:28,800
Speaker 11: to make sure that those subsidies are there. I mean, yeah, look,

617
00:29:29,200 --> 00:29:31,640
Speaker 11: Republicans want to be unified, but what they want even

618
00:29:31,680 --> 00:29:34,440
Speaker 11: more than that is to get reelected. And they know

619
00:29:34,560 --> 00:29:37,240
Speaker 11: that because of the narrow margins, it's easier for them

620
00:29:37,320 --> 00:29:39,920
Speaker 11: to go up and say, hey, we really want this,

621
00:29:39,960 --> 00:29:42,040
Speaker 11: and if you want my vote, you have to do something.

622
00:29:42,080 --> 00:29:44,760
Speaker 11: That's why we saw changes to the bill made at

623
00:29:44,760 --> 00:29:47,840
Speaker 11: two o'clock in the morning last night to try and

624
00:29:47,880 --> 00:29:50,640
Speaker 11: really firm up support for a potential vote today. But

625
00:29:50,720 --> 00:29:54,320
Speaker 11: we still really don't know if Republicans actually have the votes.

626
00:29:54,640 --> 00:29:57,720
Speaker 11: McCarthy said he felt confident, but when you're talking with

627
00:29:57,800 --> 00:30:00,240
Speaker 11: Majority Leader Steve Scalice, he keeps saying the vote will

628
00:30:00,280 --> 00:30:02,360
Speaker 11: be this week, but but he won't commit to bringing

629
00:30:02,400 --> 00:30:04,680
Speaker 11: it to the floor today necessarily.

630
00:30:04,880 --> 00:30:06,640
Speaker 2: It's just so crazy. When I was a kid, the

631
00:30:06,680 --> 00:30:11,840
Speaker 2: Republican Party was about small government, free markets, no subsidies,

632
00:30:11,960 --> 00:30:12,720
Speaker 2: what no government?

633
00:30:13,320 --> 00:30:15,600
Speaker 1: And I'm into Republican Party that you could fill a

634
00:30:15,640 --> 00:30:16,800
Speaker 1: show on that.

635
00:30:17,200 --> 00:30:19,480
Speaker 2: Emily, you should do a show what happened to the

636
00:30:19,480 --> 00:30:20,480
Speaker 2: Republican Party?

637
00:30:20,960 --> 00:30:21,680
Speaker 1: Where did they go?

638
00:30:22,280 --> 00:30:22,960
Speaker 11: Done?

639
00:30:23,120 --> 00:30:25,800
Speaker 1: The one? Yeah, I mean my dad would still vote

640
00:30:25,800 --> 00:30:27,200
Speaker 1: for Nixon if Nixon ran today.

641
00:30:27,280 --> 00:30:27,480
Speaker 4: You know.

642
00:30:28,080 --> 00:30:32,000
Speaker 1: That's but those I don't know, We'll see, uh So Emily.

643
00:30:32,560 --> 00:30:35,520
Speaker 1: President Biden announced he's running. Kind of an odd way

644
00:30:35,560 --> 00:30:37,200
Speaker 1: to do it with a videotape. It's like he's running

645
00:30:37,200 --> 00:30:38,760
Speaker 1: for you know, school president.

646
00:30:38,400 --> 00:30:41,480
Speaker 2: But under the radar, under the rax o'clock in the morning,

647
00:30:41,560 --> 00:30:44,760
Speaker 2: right in the middle of the Fox News Tucker Carlson

648
00:30:44,840 --> 00:30:47,840
Speaker 2: news cycle, Like so no one would notice. What did

649
00:30:47,840 --> 00:30:49,480
Speaker 2: they did? They were they trying to sneak it out?

650
00:30:49,480 --> 00:30:52,920
Speaker 11: Emily, Well, we all knew it was coming. We reported

651
00:30:52,960 --> 00:30:55,040
Speaker 11: on the fact that it was coming. Look, I think

652
00:30:55,040 --> 00:30:57,520
Speaker 11: everyone knew for a while that Biden was going to run,

653
00:30:57,560 --> 00:30:59,040
Speaker 11: and it was just a matter of kind of making

654
00:30:59,080 --> 00:31:01,600
Speaker 11: it official. Videos are now what all the cool kids

655
00:31:01,600 --> 00:31:03,960
Speaker 11: are doing these days. Saw Tim's got put out one

656
00:31:03,960 --> 00:31:06,400
Speaker 11: out there, and Nikki Haley put one out there, and look,

657
00:31:06,480 --> 00:31:09,000
Speaker 11: I don't think it's a giant shock that Biden's running again.

658
00:31:09,120 --> 00:31:10,760
Speaker 11: I just think that he had to make it official

659
00:31:10,920 --> 00:31:13,120
Speaker 11: and get the message out there, because you know, last

660
00:31:13,120 --> 00:31:15,240
Speaker 11: time he was like, look like, you know, I'm running

661
00:31:15,320 --> 00:31:17,720
Speaker 11: kind of as an alternative to Trump, you know, to

662
00:31:17,760 --> 00:31:20,320
Speaker 11: get government back on track. And now the message has

663
00:31:20,360 --> 00:31:22,680
Speaker 11: to be we're finishing the job. And you know, at

664
00:31:22,680 --> 00:31:25,400
Speaker 11: this point, we really it's been interesting, We really haven't

665
00:31:25,440 --> 00:31:29,120
Speaker 11: seen any Democrats yet come out and support Biden, even

666
00:31:29,160 --> 00:31:31,720
Speaker 11: though there are numerous polls out there that show that

667
00:31:31,760 --> 00:31:34,600
Speaker 11: a lot of Democrats are concerned about Biden running again.

668
00:31:34,640 --> 00:31:37,600
Speaker 11: They're concerned about his age, they want a fresh candidate.

669
00:31:38,240 --> 00:31:40,880
Speaker 11: But at this point, no one's really come forward that

670
00:31:40,960 --> 00:31:43,280
Speaker 11: seems to have the chance of seriously getting the nomination.

671
00:31:43,600 --> 00:31:45,240
Speaker 2: Maybe they just think it's a vote for Harris.

672
00:31:45,440 --> 00:31:48,280
Speaker 1: I mean, you didn't see much of the Tom free

673
00:31:49,280 --> 00:31:51,160
Speaker 1: op ed in the Times today kind of goes to

674
00:31:51,200 --> 00:31:51,920
Speaker 1: that issue.

675
00:31:51,680 --> 00:31:53,240
Speaker 2: So we didn't see much of her at all in

676
00:31:53,280 --> 00:31:55,959
Speaker 2: the video. But I think a lot of people are

677
00:31:56,000 --> 00:31:59,920
Speaker 2: concerned that a vote for Biden or you know, optimistic

678
00:32:00,160 --> 00:32:02,280
Speaker 2: to vote for Biden is a vote for Harris. I

679
00:32:02,280 --> 00:32:05,000
Speaker 2: don't know where people fall on that, but you know.

680
00:32:05,240 --> 00:32:09,520
Speaker 1: Hey, Nathan Speaker, Kevin McCarthy's Speaker of the House, how

681
00:32:09,560 --> 00:32:11,959
Speaker 1: important is the next few weeks for the speaker? Here

682
00:32:12,000 --> 00:32:14,760
Speaker 1: it feels like, man, this is a referendum on his leadership,

683
00:32:14,840 --> 00:32:15,760
Speaker 1: just point blank.

684
00:32:16,080 --> 00:32:19,360
Speaker 10: Well absolutely, I mean this was something that everybody knew

685
00:32:19,440 --> 00:32:21,440
Speaker 10: was coming. You know, there was going to be a

686
00:32:21,480 --> 00:32:23,480
Speaker 10: piece of legislation where he would need to get his

687
00:32:23,520 --> 00:32:26,240
Speaker 10: party in order, and this is it. And so if

688
00:32:26,280 --> 00:32:28,200
Speaker 10: he can show that he can get all of the

689
00:32:28,280 --> 00:32:31,080
Speaker 10: GOP on board onto this deal, this is a big

690
00:32:31,120 --> 00:32:32,880
Speaker 10: win for him. I mean, this gives him a lot

691
00:32:32,920 --> 00:32:36,280
Speaker 10: more leverage in these negotiations over the dead ceialing. If

692
00:32:36,280 --> 00:32:39,160
Speaker 10: somehow he doesn't, well, then you know, people are going

693
00:32:39,240 --> 00:32:41,920
Speaker 10: to start chipping away at his leadership and their questions

694
00:32:41,960 --> 00:32:43,800
Speaker 10: are going to be asked and so forth. And that's

695
00:32:43,840 --> 00:32:47,000
Speaker 10: what the market doesn't like, and market doesn't like uncertainty,

696
00:32:47,040 --> 00:32:50,440
Speaker 10: and so you know, we are actually just thinking that,

697
00:32:50,520 --> 00:32:52,760
Speaker 10: you know, whether or not this bill passes or not,

698
00:32:53,120 --> 00:32:55,640
Speaker 10: I'm sorry. If the bill passes, it's not going to

699
00:32:55,680 --> 00:32:57,800
Speaker 10: go anywhere. I mean, all this is dead on arrival.

700
00:32:58,080 --> 00:33:00,480
Speaker 10: But if the bill passes, at least the market can

701
00:33:00,520 --> 00:33:03,600
Speaker 10: take to the point that negotiations are going to start

702
00:33:03,600 --> 00:33:06,000
Speaker 10: in earnest. Now this gives them something to go to

703
00:33:06,000 --> 00:33:08,920
Speaker 10: the White House and say let's start here. So, uh,

704
00:33:09,040 --> 00:33:10,880
Speaker 10: you know, we haven't really seen market angst when it

705
00:33:10,880 --> 00:33:13,680
Speaker 10: comes to the dead healing just yet. You know, as

706
00:33:13,680 --> 00:33:16,320
Speaker 10: the X dat gets closer and closer, you're certainly going

707
00:33:16,320 --> 00:33:17,840
Speaker 10: to see it both on the equity side and the

708
00:33:17,840 --> 00:33:18,800
Speaker 10: fixed income side.

709
00:33:18,960 --> 00:33:23,440
Speaker 2: Do the uh, you know, President Biden mentioned the Mago Republicans.

710
00:33:23,600 --> 00:33:26,720
Speaker 2: He said they want to cut social Security. I'm not

711
00:33:26,760 --> 00:33:31,200
Speaker 2: sure if that's true. But Emily, what role do does

712
00:33:31,240 --> 00:33:33,520
Speaker 2: the you know, the right wing of the party play

713
00:33:33,560 --> 00:33:36,320
Speaker 2: in this? What role do the you know, Marjorie Taylor

714
00:33:36,360 --> 00:33:40,280
Speaker 2: Greens play in Kevin McCarthy's uh, you know, power in

715
00:33:40,320 --> 00:33:40,680
Speaker 2: the House.

716
00:33:42,080 --> 00:33:44,920
Speaker 11: I mean, certainly McCarthy has had to be very diligent

717
00:33:45,080 --> 00:33:49,040
Speaker 11: right about catering to the Marjorie Taylor Greens, to those

718
00:33:49,080 --> 00:33:52,320
Speaker 11: sort of on the conservative side, But at the same point,

719
00:33:52,320 --> 00:33:54,960
Speaker 11: he has not been able to ignore the moderates. And really,

720
00:33:55,000 --> 00:33:58,040
Speaker 11: what we had a good reminder of yesterday is that

721
00:33:58,160 --> 00:34:01,920
Speaker 11: it's not just these ideological streams. It is literally any

722
00:34:01,960 --> 00:34:05,360
Speaker 11: group of lawmakers can hold things up. There are four

723
00:34:05,400 --> 00:34:08,160
Speaker 11: Republican members from the state of Iowa. Iowa grows a

724
00:34:08,200 --> 00:34:10,680
Speaker 11: lot of corn, a lot of concern there about biofuels.

725
00:34:10,800 --> 00:34:14,239
Speaker 11: All four Iowans were in McCarthy's office yesterday trying to

726
00:34:14,239 --> 00:34:16,080
Speaker 11: get him to make changes on the bill that he

727
00:34:16,280 --> 00:34:19,279
Speaker 11: ultimately did give a little bit of ground on. And

728
00:34:19,320 --> 00:34:21,440
Speaker 11: so you can kind of see that it really just

729
00:34:21,520 --> 00:34:23,880
Speaker 11: takes you and three of your buddies to wind up

730
00:34:23,880 --> 00:34:27,360
Speaker 11: proposing a headache for Speaker McCarthy and to potentially stiny

731
00:34:27,440 --> 00:34:28,680
Speaker 11: really important legislation.

732
00:34:30,000 --> 00:34:32,840
Speaker 1: And Nathan thirty seconds left here. Let's assume that the

733
00:34:32,880 --> 00:34:36,319
Speaker 1: dead ceiling gets done. What's next for Congress? Can they

734
00:34:36,360 --> 00:34:38,720
Speaker 1: get anything really done here in this environment?

735
00:34:39,000 --> 00:34:40,520
Speaker 10: Well, you know, I was just going to talk to

736
00:34:40,520 --> 00:34:44,239
Speaker 10: the assault deduction. You know, I'm not going to say

737
00:34:44,239 --> 00:34:45,960
Speaker 10: it's going to get done, but we saw a propos

738
00:34:46,000 --> 00:34:49,160
Speaker 10: You know, we've seen statements from Republicans in moderate New

739
00:34:49,239 --> 00:34:51,040
Speaker 10: York and California saying they want to move on this,

740
00:34:51,440 --> 00:34:53,440
Speaker 10: and they can't move on salt deduction until after the

741
00:34:53,440 --> 00:34:55,560
Speaker 10: death cealing. So for those of you in New York,

742
00:34:55,640 --> 00:34:57,600
Speaker 10: I'm not saying it's going to get done, but momentum

743
00:34:57,719 --> 00:35:00,239
Speaker 10: is beginning to tweak a little bit, so keep that

744
00:35:00,280 --> 00:35:00,520
Speaker 10: in mind.

745
00:35:00,719 --> 00:35:04,040
Speaker 2: I have one year, eight months, and four days until

746
00:35:05,000 --> 00:35:07,800
Speaker 2: the salt deduction cap is retired.

747
00:35:07,880 --> 00:35:09,960
Speaker 1: It's now back on my agenda because I'm now once

748
00:35:10,000 --> 00:35:11,880
Speaker 1: again a homeowner in the great state of New Jersey.

749
00:35:11,880 --> 00:35:13,520
Speaker 1: So I'll talk to my friends down in DC see

750
00:35:13,520 --> 00:35:16,480
Speaker 1: if we can get something done here. Nathan Heggre, I'm sorry,

751
00:35:16,560 --> 00:35:19,279
Speaker 1: Nathan Dean, thanks so much. Bloomberg Intelligence He covers all

752
00:35:19,320 --> 00:35:21,799
Speaker 1: that Washington stuff that no one else, really, no one

753
00:35:21,840 --> 00:35:23,759
Speaker 1: else wants to deal with, but he does it so well.

754
00:35:23,840 --> 00:35:24,640
Speaker 2: And Emily Wilkins.

755
00:35:24,680 --> 00:35:25,240
Speaker 1: Emily Wilkins.

756
00:35:25,320 --> 00:35:27,480
Speaker 2: She is the host of the new program What Happened

757
00:35:27,520 --> 00:35:30,560
Speaker 2: to the Republican hartypen to the Republican Party with Emily Wilkins.

758
00:35:30,600 --> 00:35:33,440
Speaker 1: With Emily Wilkins coming to a station near you.

759
00:35:33,440 --> 00:35:36,560
Speaker 6: You're listening to the tape Cat's are live program Bloomberg

760
00:35:36,600 --> 00:35:40,200
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the

761
00:35:40,239 --> 00:35:42,239
Speaker 6: tune in app, Bloomberg dot Com, and.

762
00:35:42,160 --> 00:35:43,479
Speaker 4: The Bloomberg Business App.

763
00:35:43,520 --> 00:35:46,359
Speaker 6: You can also listen live on Amazon Alexa from our

764
00:35:46,360 --> 00:35:51,440
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.

765
00:35:52,400 --> 00:35:55,120
Speaker 1: All right, let's talk restaurants. Here is Emily mentioned. We

766
00:35:55,200 --> 00:35:57,479
Speaker 1: had some some numbers come out from our good friends

767
00:35:57,480 --> 00:36:01,040
Speaker 1: at Chipotle, Wendy's, all kinds of stuff. Here we check

768
00:36:01,080 --> 00:36:03,400
Speaker 1: in with Mike klen He's a senior restaurant analyst with

769
00:36:03,480 --> 00:36:07,080
Speaker 1: Bloomberg Intelligence. Mike talked to us about kind of some

770
00:36:07,120 --> 00:36:09,000
Speaker 1: of these fast food restaurants are starting to hear some

771
00:36:09,040 --> 00:36:11,959
Speaker 1: earnings coming out. Chipotle had some good number stock really

772
00:36:12,080 --> 00:36:13,520
Speaker 1: rallying today on the news. What do you see.

773
00:36:15,040 --> 00:36:19,160
Speaker 12: Yeah, so we've had just just too so far. Chipotle

774
00:36:19,320 --> 00:36:21,919
Speaker 12: and McDonald's yesterday, and they both did well. And it's

775
00:36:21,960 --> 00:36:24,400
Speaker 12: not really a surprise. They've both been really knocking to

776
00:36:24,440 --> 00:36:28,080
Speaker 12: cover off the balls since the early days of the pandemic.

777
00:36:29,200 --> 00:36:29,440
Speaker 4: You know.

778
00:36:29,640 --> 00:36:31,960
Speaker 12: Chipotle was you know, they had a good quarter. The

779
00:36:33,160 --> 00:36:36,200
Speaker 12: sales trend you know, they be pretty handily, but the

780
00:36:36,239 --> 00:36:40,719
Speaker 12: trends actually only increased about fifty basis points on a

781
00:36:40,760 --> 00:36:44,960
Speaker 12: four year basis. But what was really impressive was the

782
00:36:45,000 --> 00:36:48,400
Speaker 12: margin expansion that they saw. So so they had a

783
00:36:48,400 --> 00:36:50,600
Speaker 12: little bit of a dud with the limited time off

784
00:36:50,680 --> 00:36:55,560
Speaker 12: in the fourth quarter, the garlic Guahillo steak, and they've

785
00:36:56,160 --> 00:36:58,200
Speaker 12: they moved on to chicken out pastor in the first

786
00:36:58,280 --> 00:37:00,960
Speaker 12: quarter and they've they said it was very successful.

787
00:37:01,480 --> 00:37:01,600
Speaker 1: Uh.

788
00:37:01,680 --> 00:37:05,319
Speaker 12: They also did well with their faheta case ideas that

789
00:37:05,320 --> 00:37:09,520
Speaker 12: they were pushing on TikTok, you know, and and avocado

790
00:37:09,600 --> 00:37:11,719
Speaker 12: prices eased a little bit of year over year, and

791
00:37:11,960 --> 00:37:13,440
Speaker 12: you know, add it all up and it turned out

792
00:37:13,440 --> 00:37:15,160
Speaker 12: to be a great, great quarter.

793
00:37:15,160 --> 00:37:18,719
Speaker 1: So, Mike, for some of these fast food companies, how

794
00:37:18,760 --> 00:37:21,320
Speaker 1: are they how effective are they able to pass along

795
00:37:21,440 --> 00:37:23,960
Speaker 1: their their price increases to the consumer.

796
00:37:25,080 --> 00:37:27,440
Speaker 12: Well, we're going to see this year so far, so good, right,

797
00:37:27,840 --> 00:37:29,879
Speaker 12: We're going to see how that how you know about

798
00:37:29,960 --> 00:37:34,400
Speaker 12: ten percent price increases from last year start to you know,

799
00:37:34,480 --> 00:37:35,920
Speaker 12: we're going to see if there's gonna be any more

800
00:37:35,960 --> 00:37:38,239
Speaker 12: pushback this year now that pretty much most of the

801
00:37:38,280 --> 00:37:40,200
Speaker 12: stimulus is going to roll off, you know, the last

802
00:37:40,200 --> 00:37:42,520
Speaker 12: of the stimulus is gonna is coming off. I think

803
00:37:42,560 --> 00:37:46,480
Speaker 12: in May. That's the uh that's the moratorium on student

804
00:37:46,480 --> 00:37:50,120
Speaker 12: loan payments, right and that and that's a big cohort.

805
00:37:50,239 --> 00:37:53,920
Speaker 12: That eighteen to the thirty four year old cohort is

806
00:37:54,040 --> 00:37:57,759
Speaker 12: very big for quick quick service customers. That's a big

807
00:37:57,800 --> 00:38:01,080
Speaker 12: cohort for for them. So, you know, we're gonna see

808
00:38:01,200 --> 00:38:03,319
Speaker 12: if there's if it's going to have any impact. You know,

809
00:38:03,360 --> 00:38:05,160
Speaker 12: there's also some other things we're looking at. You know,

810
00:38:05,280 --> 00:38:10,719
Speaker 12: credit card account bounces have have hit record hit record

811
00:38:10,800 --> 00:38:12,719
Speaker 12: highs in the fourth quarter. We haven't had first quarter

812
00:38:12,800 --> 00:38:15,880
Speaker 12: numbers yet. Real incomes have dropped every month for the

813
00:38:15,960 --> 00:38:19,440
Speaker 12: last two years straight. So there's definitely some pressures we

814
00:38:19,480 --> 00:38:22,799
Speaker 12: think around the corner and we'll see, we'll see how

815
00:38:22,880 --> 00:38:25,360
Speaker 12: much consumers push back. But the thing about quick services

816
00:38:25,440 --> 00:38:27,560
Speaker 12: right there, they're a much better space than the full

817
00:38:27,600 --> 00:38:30,480
Speaker 12: service diners because it's a it's a cheaper meal occasion.

818
00:38:30,520 --> 00:38:32,560
Speaker 12: So they'll have some people kind of fall out of

819
00:38:32,600 --> 00:38:34,520
Speaker 12: the bucket, But then they'll also have some middle and

820
00:38:34,600 --> 00:38:37,200
Speaker 12: upper income consumers that that might say, you know what,

821
00:38:37,239 --> 00:38:39,160
Speaker 12: I'll skip out in the full service meal and I'm

822
00:38:39,160 --> 00:38:41,520
Speaker 12: gonna visit Chipole or McDonald instead.

823
00:38:41,640 --> 00:38:43,080
Speaker 2: By the way, Mike, I'm gonna throw you a little

824
00:38:43,080 --> 00:38:44,120
Speaker 2: bit of a curveball here.

825
00:38:44,920 --> 00:38:45,280
Speaker 3: Uh.

826
00:38:45,560 --> 00:38:50,839
Speaker 2: It really grinds my gears when I go to one

827
00:38:50,880 --> 00:38:54,319
Speaker 2: of these fast food places or like a salad bar

828
00:38:55,320 --> 00:38:58,200
Speaker 2: and I pay with you know, I use Apple Pay

829
00:38:58,520 --> 00:39:01,200
Speaker 2: or I or I pay with a credit card and

830
00:39:01,280 --> 00:39:07,959
Speaker 2: the counter the cashier turns the little screen around and says, oh, here,

831
00:39:08,200 --> 00:39:10,680
Speaker 2: just click an option of how much you want to tip?

832
00:39:11,040 --> 00:39:13,360
Speaker 2: Do you want to give us fifteen percent, twenty percent,

833
00:39:13,520 --> 00:39:15,879
Speaker 2: or twenty five percent. Don't worry, you can also give

834
00:39:15,960 --> 00:39:20,640
Speaker 2: no tip. It's an option. Who allowed these people to

835
00:39:20,719 --> 00:39:22,960
Speaker 2: put me on the spot like that and make me

836
00:39:23,040 --> 00:39:26,080
Speaker 2: feel like either a jerk or force me to tip

837
00:39:26,200 --> 00:39:29,439
Speaker 2: a fast food worker? Like why is that a thing?

838
00:39:31,239 --> 00:39:34,880
Speaker 12: Because because a lot of restaurant employees are underpaid and

839
00:39:35,280 --> 00:39:37,200
Speaker 12: restaurants are sure you're trying to figure out a way

840
00:39:37,200 --> 00:39:39,200
Speaker 12: to to you know, to.

841
00:39:39,560 --> 00:39:41,640
Speaker 2: Make me pay more for that. Look, why don't they

842
00:39:41,680 --> 00:39:43,920
Speaker 2: just pay their employees more and charge me an extra

843
00:39:44,000 --> 00:39:46,320
Speaker 2: dollar for my big Mac or whatever? It just seems

844
00:39:46,360 --> 00:39:46,960
Speaker 2: so rude.

845
00:39:47,440 --> 00:39:50,799
Speaker 12: Well because of paying that extra dollar. You know, you

846
00:39:50,920 --> 00:39:53,279
Speaker 12: or I might not blink at the extra dollar for

847
00:39:53,320 --> 00:39:56,239
Speaker 12: the meal, but a lot of people will, especially in

848
00:39:56,280 --> 00:40:00,279
Speaker 12: Middle America. So that's that's their their apprehension about that.

849
00:40:00,360 --> 00:40:03,799
Speaker 12: You know, Chipotle mentioned that they that they recently rolled

850
00:40:03,800 --> 00:40:07,520
Speaker 12: out tipping on their apps, right, and the same thing.

851
00:40:07,560 --> 00:40:09,319
Speaker 12: I ordered my son a burrito the other day and

852
00:40:09,320 --> 00:40:11,359
Speaker 12: it was like, would you like to leave? You know,

853
00:40:11,560 --> 00:40:15,120
Speaker 12: eighteen percent? Two percent? You know, uh, and it was

854
00:40:15,120 --> 00:40:16,560
Speaker 12: a pickup order. We were doing the work.

855
00:40:16,680 --> 00:40:19,000
Speaker 2: So, well, how does shareholders look at that?

856
00:40:19,040 --> 00:40:19,200
Speaker 4: Mic?

857
00:40:19,239 --> 00:40:22,280
Speaker 2: I mean, our shareholder is happy because Chipotle is getting

858
00:40:22,360 --> 00:40:26,040
Speaker 2: the consumer to foot the bill for Chipotle's employees or

859
00:40:26,600 --> 00:40:29,120
Speaker 2: you know, is there any concern that consumers are going

860
00:40:29,160 --> 00:40:30,520
Speaker 2: to fight back against this?

861
00:40:31,920 --> 00:40:34,200
Speaker 12: Well, listen, the consumer can fight back, but just by

862
00:40:34,360 --> 00:40:37,920
Speaker 12: clicking no tip, right, So as long as it's helping

863
00:40:38,239 --> 00:40:42,480
Speaker 12: the restaurant level and operating margins by keeping labor down.

864
00:40:42,520 --> 00:40:45,400
Speaker 12: I think investors like it, right, I mean, Chipotle's getting

865
00:40:45,440 --> 00:40:47,799
Speaker 12: back to you know, they might hit a twenty seven

866
00:40:47,840 --> 00:40:50,760
Speaker 12: percent restaurant margin in the second quarter based on their guidance,

867
00:40:50,800 --> 00:40:52,960
Speaker 12: and that that's that's the level we haven't seen in

868
00:40:52,960 --> 00:40:55,120
Speaker 12: a very long time, since before you know, the e

869
00:40:55,239 --> 00:40:58,560
Speaker 12: coli issues back in like twenty sixteen. So if you

870
00:40:58,560 --> 00:41:00,800
Speaker 12: look at the stock today, up for team plus percent,

871
00:41:00,840 --> 00:41:01,880
Speaker 12: I think of Vesta's like it.

872
00:41:02,120 --> 00:41:05,440
Speaker 2: At Chipotle, it's safe to click no tip because you

873
00:41:05,520 --> 00:41:09,120
Speaker 2: watch them make your food right before they present you

874
00:41:09,160 --> 00:41:12,080
Speaker 2: with the option. But I was at Shakeshack the other

875
00:41:12,200 --> 00:41:15,640
Speaker 2: day and the guy, the cashier was like, how much

876
00:41:15,680 --> 00:41:17,799
Speaker 2: do you want to tip us? We really need your tip.

877
00:41:17,960 --> 00:41:20,759
Speaker 2: We'd appreciate your tip. And then they're gonna make my

878
00:41:20,840 --> 00:41:24,120
Speaker 2: food after they see what I've chosen, right, So then

879
00:41:24,200 --> 00:41:25,640
Speaker 2: it gets a little bit sketchy.

880
00:41:26,520 --> 00:41:29,360
Speaker 12: So that's a little aggressive, that's a little aggressive.

881
00:41:29,960 --> 00:41:31,879
Speaker 1: One step up in the fast food I'm not you guys,

882
00:41:32,239 --> 00:41:33,680
Speaker 1: I'm not sure what you guys call that, but just

883
00:41:33,760 --> 00:41:35,640
Speaker 1: how's that segment of the restaurant business doing.

884
00:41:36,200 --> 00:41:40,040
Speaker 12: Yeah, casual dining, yes, you know, we'll see I mean

885
00:41:40,040 --> 00:41:43,680
Speaker 12: the numbers slowed in you know, in the first quarter

886
00:41:43,680 --> 00:41:45,920
Speaker 12: as the quarter went on, so January, and we had

887
00:41:45,960 --> 00:41:48,959
Speaker 12: some very easy comps based on lapping the Ober krown

888
00:41:49,320 --> 00:41:51,839
Speaker 12: outbreak from last year. We had a couple of weeks

889
00:41:51,840 --> 00:41:53,880
Speaker 12: of that also in February, but then in March that

890
00:41:53,960 --> 00:41:57,359
Speaker 12: went away and SAMs sales only rose, you know, one

891
00:41:57,360 --> 00:42:02,040
Speaker 12: point eight percent across the industry in March. We suspect

892
00:42:02,080 --> 00:42:04,960
Speaker 12: there could be an additional slowing in April, and I

893
00:42:04,960 --> 00:42:06,920
Speaker 12: think part of that could be that trade down that

894
00:42:06,960 --> 00:42:09,400
Speaker 12: we were talking about where customers are saying, you know what,

895
00:42:09,600 --> 00:42:13,120
Speaker 12: I'll save some money on the on the tip and uh,

896
00:42:13,400 --> 00:42:15,680
Speaker 12: you know, and on drinks and advertisers and desserts and

897
00:42:15,680 --> 00:42:19,160
Speaker 12: we'll just hit McDonald's instead of you know, name the chain,

898
00:42:19,280 --> 00:42:22,480
Speaker 12: Chili's or Fridays or something like that. So we expect

899
00:42:22,640 --> 00:42:24,319
Speaker 12: there to be a lot more pressure on the full

900
00:42:24,360 --> 00:42:27,279
Speaker 12: service chains this year for that reason. And you know,

901
00:42:27,320 --> 00:42:31,280
Speaker 12: we'll see nobody's nobody's reported yet on the first quarter.

902
00:42:31,400 --> 00:42:34,399
Speaker 12: So right, we're anxiously awaiting, all.

903
00:42:34,400 --> 00:42:35,839
Speaker 1: Right, good stuff. We'll get you back when we get

904
00:42:35,880 --> 00:42:38,160
Speaker 1: some more results out of those retailers. Mike Klin, he's

905
00:42:38,200 --> 00:42:41,720
Speaker 1: a restaurant analyst at Bloomberg Intelligence giving us the lowdown

906
00:42:41,760 --> 00:42:42,680
Speaker 1: on the restaurant biz.

907
00:42:43,080 --> 00:42:46,720
Speaker 6: You're listening to the tape can't Live program Bloomberg Markets

908
00:42:46,760 --> 00:42:50,160
Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune

909
00:42:50,200 --> 00:42:51,879
Speaker 6: in app, Bloomberg dot Com, and.

910
00:42:51,840 --> 00:42:53,160
Speaker 4: The Bloomberg Business App.

911
00:42:53,200 --> 00:42:56,000
Speaker 6: You can also listen live on Amazon Alexa from our

912
00:42:56,040 --> 00:43:00,920
Speaker 6: flagship New York station Just Say Alexa playing Bloomberg eleven.

913
00:43:02,160 --> 00:43:03,040
Speaker 4: Now. I have.

914
00:43:04,960 --> 00:43:08,080
Speaker 2: Had an interesting experience back in twenty sixteen. I won

915
00:43:08,160 --> 00:43:09,239
Speaker 2: a little bit of money.

916
00:43:10,520 --> 00:43:11,160
Speaker 1: In a lottery.

917
00:43:12,400 --> 00:43:16,200
Speaker 2: Let's just say I won some money, okay, and I thought, uh,

918
00:43:16,280 --> 00:43:18,160
Speaker 2: I want to buy a Rolex watch. I've never had

919
00:43:18,200 --> 00:43:20,640
Speaker 2: one before and I was, I don't know, forty five

920
00:43:20,719 --> 00:43:25,279
Speaker 2: years old. So I went to uh Torneau here in

921
00:43:25,320 --> 00:43:28,120
Speaker 2: the city. I think I'm Madison, right, yeah, yeah, And

922
00:43:28,400 --> 00:43:30,320
Speaker 2: you just walked in and looked at the Rolex watches

923
00:43:30,320 --> 00:43:32,160
Speaker 2: they had in the shop, and I picked one out

924
00:43:32,160 --> 00:43:34,880
Speaker 2: and I bought it. Okay, easy, pasy, sure you know.

925
00:43:35,520 --> 00:43:39,560
Speaker 2: Now fast forward to this week, I'm about to turn

926
00:43:39,640 --> 00:43:42,160
Speaker 2: fifty and my wife has said, you know, maybe she'll

927
00:43:42,160 --> 00:43:44,840
Speaker 2: buy me another one. I lost the first one in

928
00:43:44,880 --> 00:43:49,600
Speaker 2: a motorcycle accident. But so I go into Torneau and

929
00:43:49,680 --> 00:43:52,120
Speaker 2: I say, where are your Rolex watches? Oh, we don't

930
00:43:52,120 --> 00:43:55,720
Speaker 2: have any for sale. What Torneau, it's like the biggest

931
00:43:55,719 --> 00:43:59,160
Speaker 2: now it's called Booker, It's like the biggest Rolex dealer

932
00:43:59,160 --> 00:44:01,440
Speaker 2: in America. I said, so, not in this store. Can

933
00:44:01,480 --> 00:44:03,840
Speaker 2: I find one downtown? Is there gonna be one of

934
00:44:03,840 --> 00:44:07,279
Speaker 2: the Westchester? No, there are no Rolexes for sale. They've

935
00:44:07,320 --> 00:44:10,520
Speaker 2: got display pieces that they're not gonna sell. And then

936
00:44:10,719 --> 00:44:12,279
Speaker 2: but what you do is you put your name and

937
00:44:12,400 --> 00:44:15,160
Speaker 2: number down and I guess you like bribe the sales

938
00:44:15,200 --> 00:44:17,440
Speaker 2: clerk and hope hopefully they call you back in a

939
00:44:17,440 --> 00:44:19,680
Speaker 2: few months to a year and let you buy it. Wow,

940
00:44:19,960 --> 00:44:22,520
Speaker 2: it's just so weird. And I don't understand if it's

941
00:44:22,560 --> 00:44:27,480
Speaker 2: because demand has shot up, you know, with the stimmy

942
00:44:27,560 --> 00:44:31,080
Speaker 2: checks and the pandemic, or if Rolex is pulling back supply. Anyway,

943
00:44:31,080 --> 00:44:33,640
Speaker 2: I wanted to ask an expert, and it just so

944
00:44:33,760 --> 00:44:35,799
Speaker 2: happens they had a watch guy. We have a watch

945
00:44:35,840 --> 00:44:38,120
Speaker 2: guy in Geneva. Andy Hoffman wrote a great piece about

946
00:44:38,120 --> 00:44:41,319
Speaker 2: the outperformance of the Rolex Daytona models. They put out

947
00:44:41,320 --> 00:44:44,760
Speaker 2: a really cool I think white gold or platinum Daytona

948
00:44:44,840 --> 00:44:46,840
Speaker 2: with a with a light blue face that's going for

949
00:44:46,880 --> 00:44:49,719
Speaker 2: like one hundred grand wow, because no one can find

950
00:44:49,800 --> 00:44:52,200
Speaker 2: them from MSRP. Andy Hoffman joins us right now to

951
00:44:52,239 --> 00:44:55,520
Speaker 2: talk about this issue. Andy, what do you think is it?

952
00:44:55,800 --> 00:44:58,759
Speaker 2: Are we in just a new era? Has Rolex engineered

953
00:44:58,760 --> 00:45:03,320
Speaker 2: this perfectly? So the their products are you know, unfindable

954
00:45:03,360 --> 00:45:06,240
Speaker 2: and that drives demand even higher.

955
00:45:08,400 --> 00:45:09,280
Speaker 4: Well, good morning.

956
00:45:09,760 --> 00:45:13,360
Speaker 13: This is a very complex and this is the you

957
00:45:13,400 --> 00:45:16,520
Speaker 13: know question, and this is the question that everyone is asking,

958
00:45:16,520 --> 00:45:20,640
Speaker 13: and indeed your experiences is not unusual. You cannot buy

959
00:45:21,480 --> 00:45:29,520
Speaker 13: most Rolex professional models at retail at manufactured or manufacture price,

960
00:45:30,480 --> 00:45:34,680
Speaker 13: and what that has created is a secondary market where

961
00:45:35,560 --> 00:45:40,840
Speaker 13: Rolex watches sell for above the suggested retail price. Indeed,

962
00:45:40,840 --> 00:45:47,040
Speaker 13: though Roles certainly says they are have not tried to

963
00:45:47,080 --> 00:45:52,040
Speaker 13: create this situation. They don't want this situation. But at

964
00:45:52,040 --> 00:45:55,760
Speaker 13: the same time, it's very difficult for them to increase production.

965
00:45:55,880 --> 00:46:01,600
Speaker 13: They are increasing production marginally. We've written about this. There

966
00:46:01,600 --> 00:46:04,959
Speaker 13: actually have a plans for a major new facility here

967
00:46:04,960 --> 00:46:08,840
Speaker 13: in Switzerland and bull in twenty twenty nine, which is

968
00:46:08,920 --> 00:46:13,160
Speaker 13: quite a way off. But indeed, because demand is so powerful,

969
00:46:13,239 --> 00:46:16,879
Speaker 13: right now and so strong. They're going to build some

970
00:46:17,000 --> 00:46:21,279
Speaker 13: temporary facilities beginning in twenty twenty four and launching in

971
00:46:21,280 --> 00:46:26,799
Speaker 13: twenty twenty five that hopefully may increase production somewhat and

972
00:46:28,160 --> 00:46:30,800
Speaker 13: maybe bring some relief to people like yourself who would

973
00:46:30,840 --> 00:46:34,319
Speaker 13: like to buy a Rolex at the retailer. But they

974
00:46:34,360 --> 00:46:37,000
Speaker 13: make over a million watches a year, one point two

975
00:46:37,000 --> 00:46:39,320
Speaker 13: million by some estimates, So it's a lot of watches.

976
00:46:40,480 --> 00:46:43,240
Speaker 1: Yeah, So I mean, is is it just a Rolex

977
00:46:43,280 --> 00:46:44,920
Speaker 1: issue or is it just or is it brought it

978
00:46:44,960 --> 00:46:47,680
Speaker 1: more broadly define a luxury watch issue.

979
00:46:48,600 --> 00:46:51,640
Speaker 13: Yeah, it's a good question. It's not just a Rolex

980
00:46:51,680 --> 00:46:55,480
Speaker 13: issue that you know, you cannot buy any new Protect

981
00:46:55,480 --> 00:47:01,040
Speaker 13: Philipps models at retail, same with Odomarp Gay, any of

982
00:47:01,080 --> 00:47:06,439
Speaker 13: those high demand super hype watches that you know sort

983
00:47:06,440 --> 00:47:09,440
Speaker 13: of came to the forefront during the pandemic. And you're

984
00:47:09,560 --> 00:47:12,360
Speaker 13: right to talk about the stimulus checks in the United States,

985
00:47:12,560 --> 00:47:15,280
Speaker 13: and you're right to to to talk about the pandemic

986
00:47:15,320 --> 00:47:18,600
Speaker 13: because you know, people were stuck at home, they had

987
00:47:18,600 --> 00:47:22,040
Speaker 13: a lot more time on their computer. There's a lot

988
00:47:22,040 --> 00:47:26,560
Speaker 13: of great information out there about luxury watches and sort

989
00:47:26,560 --> 00:47:28,480
Speaker 13: of you know, the whole market kind of it was

990
00:47:28,520 --> 00:47:33,080
Speaker 13: already growing and interest was increasing, but it really changed

991
00:47:33,520 --> 00:47:36,520
Speaker 13: during the pandemic. And it's you guys in the US

992
00:47:36,560 --> 00:47:40,200
Speaker 13: who are really driving this. This too, this is an

993
00:47:40,239 --> 00:47:41,320
Speaker 13: American story.

994
00:47:41,800 --> 00:47:46,720
Speaker 2: Well, I wonder about how much I can take Rolex

995
00:47:46,760 --> 00:47:49,239
Speaker 2: at their word when you start to talk about the

996
00:47:49,320 --> 00:47:54,480
Speaker 2: you know, ultra luxury, the big three vascher On, Constantine,

997
00:47:54,680 --> 00:47:59,360
Speaker 2: Auto Mars or what was the other one, protect Philip.

998
00:47:59,680 --> 00:48:03,960
Speaker 2: You know, it's such a specialized market. These are watches

999
00:48:04,000 --> 00:48:08,120
Speaker 2: that only real watch people even know about, right Whereas Rolex,

1000
00:48:08,640 --> 00:48:12,640
Speaker 2: you know, every it's a household name, and they strongly

1001
00:48:12,680 --> 00:48:16,200
Speaker 2: suggest Andy, as you know well, that you only buy

1002
00:48:16,239 --> 00:48:21,600
Speaker 2: their watches from authorized dealers. And supposedly they're very serious

1003
00:48:21,680 --> 00:48:24,960
Speaker 2: about stopping authorized dealers from leaking their watches onto the

1004
00:48:24,960 --> 00:48:28,439
Speaker 2: gray market. But why is it, then that there are

1005
00:48:28,560 --> 00:48:31,960
Speaker 2: so many brand new Rolexes in the gray market. I

1006
00:48:32,000 --> 00:48:34,160
Speaker 2: just ran a search for the yacht Master forty two.

1007
00:48:34,440 --> 00:48:37,160
Speaker 2: It's a brand new model that hardly any stores even

1008
00:48:37,239 --> 00:48:40,359
Speaker 2: have in display, and yet there are two hundred and

1009
00:48:40,440 --> 00:48:45,120
Speaker 2: fifty eight unworn inbox with paper examples on Krono twenty four.

1010
00:48:45,400 --> 00:48:49,799
Speaker 2: Rolex just brought out a new GMT Master two that's

1011
00:48:49,840 --> 00:48:52,600
Speaker 2: being nicknamed the bat Girl because it's like the Batman

1012
00:48:53,360 --> 00:48:57,280
Speaker 2: GMT Master, but it's on the Jubilee bracelet. They're brand

1013
00:48:57,320 --> 00:48:59,920
Speaker 2: new and Krono twenty four has three hundred and twenty two.

1014
00:49:00,080 --> 00:49:03,160
Speaker 2: Where is the grain market getting all these watches if

1015
00:49:03,160 --> 00:49:05,680
Speaker 2: the authorized dealer isn't selling it to them, or if

1016
00:49:05,760 --> 00:49:08,160
Speaker 2: Rolex isn't slipping them out the back door.

1017
00:49:09,080 --> 00:49:11,520
Speaker 13: Well, it's a good question, and it's certainly you know,

1018
00:49:11,600 --> 00:49:16,920
Speaker 13: Rules is not a seller to consumer of watches. Authorized

1019
00:49:16,920 --> 00:49:19,880
Speaker 13: dealers are, and so the question is what happens at

1020
00:49:19,920 --> 00:49:24,239
Speaker 13: the authorized dealer level. And indeed, if you or I

1021
00:49:24,920 --> 00:49:27,160
Speaker 13: or a friend of yours has a good relationship with

1022
00:49:27,200 --> 00:49:30,120
Speaker 13: an authorized dealer, they may get an allocation for that

1023
00:49:30,200 --> 00:49:33,400
Speaker 13: Rolex that they want, and then that person has a choice,

1024
00:49:34,400 --> 00:49:37,520
Speaker 13: and you know, the way that the current secondary market

1025
00:49:37,760 --> 00:49:40,960
Speaker 13: is they can turn around and sell that Rolex for

1026
00:49:41,360 --> 00:49:44,760
Speaker 13: quite a tidy profit because prices on the secondary market

1027
00:49:45,000 --> 00:49:49,200
Speaker 13: are higher than at retail, and so that is a

1028
00:49:49,239 --> 00:49:53,720
Speaker 13: temptation and that is a business for many people. However,

1029
00:49:53,840 --> 00:49:56,160
Speaker 13: at the same time, whether it be Rolex or Protec

1030
00:49:56,280 --> 00:50:01,400
Speaker 13: or Odemar Piguey, all of these Swiss watchmakers try to

1031
00:50:01,640 --> 00:50:06,880
Speaker 13: police and try to have oversight over what dealers are doing,

1032
00:50:07,200 --> 00:50:10,319
Speaker 13: and if they are seen to be selling to flippers,

1033
00:50:11,360 --> 00:50:13,680
Speaker 13: they are penalized. I mean, we did an interview with

1034
00:50:13,719 --> 00:50:17,360
Speaker 13: Tierry Stern, who's the CEO or the president of Protect

1035
00:50:17,400 --> 00:50:21,719
Speaker 13: for Leap. His family owns protect for Leap, and you know,

1036
00:50:21,760 --> 00:50:24,640
Speaker 13: he said he buys about two hundred watches on the

1037
00:50:24,680 --> 00:50:28,680
Speaker 13: secondary market himself a year, or the company does figures

1038
00:50:28,719 --> 00:50:33,040
Speaker 13: out where they're from and figures out if the dealers

1039
00:50:33,040 --> 00:50:35,720
Speaker 13: who sold them were selling them to the wrong person.

1040
00:50:36,280 --> 00:50:39,120
Speaker 13: So this is a this is a problem that the

1041
00:50:39,200 --> 00:50:42,200
Speaker 13: brands recognize and they don't want this to happen.

1042
00:50:42,640 --> 00:50:45,839
Speaker 2: Andy, I wonder if we're getting set up for a

1043
00:50:45,880 --> 00:50:49,560
Speaker 2: fall here because the demand is so hot and as

1044
00:50:49,600 --> 00:50:51,399
Speaker 2: you say, a lot of people are just buying them

1045
00:50:51,400 --> 00:50:54,000
Speaker 2: and flipping them right away. And I go on the forums,

1046
00:50:54,560 --> 00:50:58,000
Speaker 2: the Rolex forum is very popular, and I hear one

1047
00:50:58,080 --> 00:51:03,560
Speaker 2: refrain from all of the collectors and enthusiasts. Prices never

1048
00:51:03,719 --> 00:51:06,640
Speaker 2: go down. And that's kind of like what we heard

1049
00:51:06,640 --> 00:51:09,360
Speaker 2: about home prices in two thousand and seven.

1050
00:51:09,760 --> 00:51:09,960
Speaker 4: Right.

1051
00:51:10,600 --> 00:51:14,040
Speaker 2: Is it possible, especially as Rolex is preparing to boost production,

1052
00:51:14,560 --> 00:51:17,080
Speaker 2: that we finally have a downturn if we enter a

1053
00:51:17,160 --> 00:51:18,000
Speaker 2: US recession.

1054
00:51:19,280 --> 00:51:23,239
Speaker 13: Absolutely, and you guys have been around business as long

1055
00:51:23,280 --> 00:51:26,520
Speaker 13: as I have, I'm sure, and we know that nothing

1056
00:51:26,560 --> 00:51:29,520
Speaker 13: goes up forever. And indeed we've seen prices on the

1057
00:51:29,560 --> 00:51:34,319
Speaker 13: secondary market already being have been declining for the past year.

1058
00:51:34,560 --> 00:51:38,879
Speaker 13: So that Rolex Daytona, that protect Nautilus, that ap Royal Oak,

1059
00:51:39,200 --> 00:51:43,040
Speaker 13: prices for those really hyped models are all down anywhere

1060
00:51:43,080 --> 00:51:47,120
Speaker 13: between twenty five and and you know, thirty five forty

1061
00:51:47,160 --> 00:51:51,400
Speaker 13: percent in the past year. The overall market indexes that

1062
00:51:51,440 --> 00:51:54,240
Speaker 13: track them, and indeed, we at Bloomberg have just launched

1063
00:51:55,040 --> 00:51:58,719
Speaker 13: something called the Bloomberg Subdial Watch Index, which you'll see

1064
00:51:58,760 --> 00:52:03,200
Speaker 13: us generate. It's called it's called the Bloomberg sub Dial

1065
00:52:03,400 --> 00:52:07,200
Speaker 13: Watch Index. And this is something that we've created with

1066
00:52:07,239 --> 00:52:10,800
Speaker 13: the news innovation team uh here and here in Europe

1067
00:52:11,080 --> 00:52:16,720
Speaker 13: and with a trader and pre owned dealer in London

1068
00:52:16,800 --> 00:52:20,160
Speaker 13: called sub Dial. Check them out. They're they're great, they're

1069
00:52:20,200 --> 00:52:22,799
Speaker 13: really cool and and and what they do is they

1070
00:52:22,960 --> 00:52:29,759
Speaker 13: scrape the data from you know, thousands of transactions for

1071
00:52:29,880 --> 00:52:34,319
Speaker 13: secondary on the secondary market for pre owned watches, and

1072
00:52:34,440 --> 00:52:37,640
Speaker 13: they come up with prices and so current market prices

1073
00:52:37,640 --> 00:52:40,160
Speaker 13: They're not the only people who do this, but uh,

1074
00:52:40,200 --> 00:52:42,320
Speaker 13: they do it quite well, and they've shared the data

1075
00:52:42,360 --> 00:52:46,440
Speaker 13: with us. And now we're generating stories and charts and

1076
00:52:46,520 --> 00:52:48,360
Speaker 13: things like that so we can track prices.

1077
00:52:48,480 --> 00:52:50,239
Speaker 1: Yeah, we gotta.

1078
00:52:50,480 --> 00:52:51,480
Speaker 2: We got to watch guy.

1079
00:52:51,719 --> 00:52:54,480
Speaker 1: Yeah, we're gonna call you more often. Yeah, we might

1080
00:52:54,520 --> 00:52:56,799
Speaker 1: even come over to Geneva where you are. We'll do

1081
00:52:56,920 --> 00:52:58,120
Speaker 1: some little primary research.

1082
00:52:58,200 --> 00:52:58,680
Speaker 2: Ry Zurich.

1083
00:52:59,600 --> 00:53:00,640
Speaker 13: I'm in I'm in Geneva.

1084
00:53:00,760 --> 00:53:02,120
Speaker 2: I'm in Niniva, right, yeah.

1085
00:53:01,960 --> 00:53:03,560
Speaker 1: All right, guys, we have friends in Geneva and we've

1086
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Speaker 1: got friends in Zurich. We'll come over, all right, Andy,

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Speaker 1: thanks so much for joining us. Andy Hoffin, reporter for

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Speaker 1: Bloomberg News.

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Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can

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Speaker 2: subscribe and listen to interviews on Apple Podcasts or whatever

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Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter

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Speaker 2: at Matt Miller nineteen seventy three.

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Speaker 1: And I'm fall Sweeney. I'm on Twitter at pt Sweeney.

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Speaker 1: Before the podcast, you can always catch us worldwide at

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Speaker 1: Bloomberg Radio