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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 called Apple Podcasts or wherever

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

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Speaker 1: podcast rate and smack in the middle of earning season here,

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Speaker 1: lots going on, but we do have a big day

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Speaker 1: tomorrow for the market, and then as a Federal Reserve

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Speaker 1: is going to meet and we're gonna hear what they're

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Speaker 1: gonna do with interest rates and get a little bit

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Speaker 1: of a preview. Here, Lydia Bussor joins us. She's a

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Speaker 1: senior economist at e Y Parthanachi joins us live here

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Speaker 1: in our Bloomberg Interactive Broker studio. So, Lydia, what do

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Speaker 1: you guys at Ey, what do you think you're going

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Speaker 1: to hear from this Federal Reserve tomorrow when we hear

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Speaker 1: from Fed Chairman J Powell.

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Speaker 3: Sure? So, I think at this stage the twenty five

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Speaker 3: bases front rate hike is pretty much baked in, so

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Speaker 3: the focus will really be on the press conference, I

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Speaker 3: think Fetcher Palell, we'll want to maintain that hockey Ish

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Speaker 3: stilt and keep the options open in terms of you know,

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Speaker 3: potentially hiking again before the end of the year. So

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Speaker 3: we're likely to see, you know, to still have that

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Speaker 3: hockey tone and at the same time also you know,

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Speaker 3: sticking to that slower pace of tightening. So in our view,

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Speaker 3: we're likely to see the Federal Reserve skipping another rate

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Speaker 3: hike in September, and by November, we think that the

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Speaker 3: economic activity will have slowed significantly and we will have

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Speaker 3: seen inflation also coming back down quite significantly as well,

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Speaker 3: and that will you know, lead the Fed to stay

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Speaker 3: on the sidelines. And so we think we tomorrow is

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Speaker 3: going to be the last rate hike in the cycle.

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Speaker 4: When it comes to economies in the recession calls, it's

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Speaker 4: really become dicey. If you look at the ECFC function

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Speaker 4: in the Bloomberg terminal, the revisions for the second and

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Speaker 4: third quarter have been adjusted higher. How do you view

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Speaker 4: wherethy economy is projected to go in the US? Because

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Speaker 4: even just looking at the IMF this morning, we ended

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Speaker 4: up lipping the world out look just based on the

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Speaker 4: strength that we have seen in the US and the

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Speaker 4: stability there.

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Speaker 3: Yeah, I mean, we've seen some encouraging science for the economy.

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Speaker 3: When we look at the latest economic data and from

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Speaker 3: you know, our conversations also with our clients, we are

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Speaker 3: seeing more caution from consumers and businesses, but we're not

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Speaker 3: seeing a private sector retrenchment in terms of activity. So

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Speaker 3: we are seeing you know, downshifting economic activity. We are

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Speaker 3: seeing that moderation and inflation, and we are also seeing

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Speaker 3: that you know, soft rebalancing in the label market and

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Speaker 3: that's definitely led you know, forecasters to raise their expectations

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Speaker 3: for growth this year, and also it has also led

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Speaker 3: us to you know, lower our odds of our recession. Now,

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Speaker 3: I think in this environment, it's still important to remember

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Speaker 3: that there are some strong headwinds currently facing the economy

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Speaker 3: and that includes tighter credit conditions and that's going to

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Speaker 3: continue to put downward pressure on the economy in the

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Speaker 3: second half of the year. So we are expecting to

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Speaker 3: see some recession conditions later this year.

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Speaker 1: You know, the US Consumer Conference came out as John

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Speaker 1: Tucker was just reporting a two year high. I found

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Speaker 1: the Federal Reserve and I see that data point, I'm

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Speaker 1: like I can raise rates some more.

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Speaker 3: Yeah, risk, Yeah, I mean, consumers have showed some resilience.

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Speaker 3: We've seen consumers continuing to spend despite higher interest rates,

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Speaker 3: despite the fact that you know, credit has become harder

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Speaker 3: to access and more expensive. And so that resilience has

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Speaker 3: been you know, tied to excess savings and the fact

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Speaker 3: that they've been able to draw down on these excess

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Speaker 3: savings to continue to spend. And at the same time,

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Speaker 3: you know, it's important also to think about some of

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Speaker 3: the headwinds facing the consumer. We still have high inflation,

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Speaker 3: they can no longer rely on these excess savings to

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Speaker 3: support spending. And when we look at you know, the fall,

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Speaker 3: we're going to have the restart or the student loan repayments,

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Speaker 3: and that's also going to be a headwind for the consumer.

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Speaker 3: So the consumers continue to spend, but they are more cautious.

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Speaker 3: They are also more selective with their spendings.

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Speaker 4: On Friday, we actually get the Employment Costs Index, which

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Speaker 4: is quarterly. We all know Pala and other policy makers

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Speaker 4: wash up very closely the gauge wage inflation, but also

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Speaker 4: their preferre gauge when it comes to PCE. And then

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Speaker 4: in between this decision and then the one on September twentieth.

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Speaker 4: We still have a batch of other CPI data PPI

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Speaker 4: as well as PCE. Will that be enough to where

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Speaker 4: if it continues to be enough for the Fed to

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Speaker 4: actually conclude this tightening cycle.

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Speaker 3: Yes, that's the real question. I mean, the FED has

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Speaker 3: become extremely data dependent, and so you know they're going

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Speaker 3: to be closely looking at all these incoming data between

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Speaker 3: non and September to make a decision. And that's a

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Speaker 3: key reason why they really want to keep options open

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Speaker 3: to that, you know, to a potential rate hike. When

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Speaker 3: it comes to wage growth, we know that the FED

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Speaker 3: is going to be closely looking at the ECI. I

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Speaker 3: think there are some good reasons to think that we're

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Speaker 3: going to see some moderation on the wagefront. We've seen

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Speaker 3: that rebalancing in the label market making some progress, and

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Speaker 3: at the same time we are also seeing the services

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Speaker 3: side of inflation also starting to cool as well. So

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Speaker 3: we're expecting, you know, wage growth to moderate, to show

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Speaker 3: some slight moderation on Friday, and then also looking at

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Speaker 3: the rest of the year.

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Speaker 1: LYDIA, can you explain to me and to our listeners

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Speaker 1: why inflation in Europe is so much more persistent and

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Speaker 1: difficult than it is here in the US.

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Speaker 3: I mean, I think in when you look at what's

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Speaker 3: been happening in Europe, part of the story has also

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Speaker 3: been tied to label markets. So there is some label

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Speaker 3: market tightness and that's also what we've seen in the US.

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Speaker 3: And then you know, if you look at the economy,

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Speaker 3: we've also seen some resilience in the European economy. We've

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Speaker 3: seen you know, the europe and European economy performing quite

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Speaker 3: well over the winter when we were expecting things to

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Speaker 3: get worse, and so part of that, I think is

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Speaker 3: also helps explain why, you know, inflation pressures have remained

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Speaker 3: persistent in Europe.

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Speaker 4: Can the US pull off a soft learning because the

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Speaker 4: dynamics with inflation being very different here than overseas.

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Speaker 3: If we continue to see some of the dynamics we're

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Speaker 3: seeing right now in the economy, I think there is

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Speaker 3: a chance that we could see a seft lending. I

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Speaker 3: think the runway for the selft lending has become wider

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Speaker 3: as we've seen that moderation in inflation, as we've seen

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Speaker 3: that you know, resilience in economic activity, the economy is slowing,

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Speaker 3: but it's not retrenching, so you know, consumers and businesses

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Speaker 3: still spending and hiring, and the label market as well,

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Speaker 3: we need to continue to see that rebalancing. I think

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Speaker 3: when you look at the label market, what's really encouraging

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Speaker 3: as well is that rebound in the labor supply and

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Speaker 3: the fact that labor force participation has also been rising

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Speaker 3: when you look at primate liber force participation. So if

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Speaker 3: we continue to see that rebalancing between supply and demand,

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Speaker 3: and we continue to see that moderation in inflation, there

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Speaker 3: is a chance that the economy, you know, could you know,

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Speaker 3: pull up that self lending.

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Speaker 1: I think the economists are going to have to rewrite

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Speaker 1: some of these textbooks going forward because I don't understand

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Speaker 1: it and can't explain really why our labor market is

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Speaker 1: as strong as it is here in the United States.

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Speaker 1: Do you have a theory?

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Speaker 3: I mean, the tightness we're seeing in the label market

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Speaker 3: right now is reflecting some of the label market dislocations

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Speaker 3: that we've seen during the pandemic. We had this dramatic

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Speaker 3: shock that really led to a huge decline in the

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Speaker 3: labor supply, and that came at a time when labor

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Speaker 3: demand became very strong, and so that mismatch in the

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Speaker 3: label market has really generated a lot of label market tightness,

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Speaker 3: and we saw wage growth, you know, raising very rapidly.

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Speaker 3: Some of these labor shortages have eased, and so that

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Speaker 3: has led to the beginning of moderation in wage growth.

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Speaker 3: But some of these labor shortages are also going to

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Speaker 3: continue moving forward. And then we also have some demographic

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Speaker 3: factor acting in the background as well and pulling down

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Speaker 3: on labor force participation.

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Speaker 4: So if the Fed does indeed raise rates at least

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Speaker 4: two more times this year, could that potentially be the

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Speaker 4: policy mistake If we're waiting for those lagged effects after

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Speaker 4: the last ten meetings where they raised rates that investors

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Speaker 4: in everybody in the US is like projecting where this

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Speaker 4: recession could be headed that everyone was waiting for. That

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Speaker 4: could actually end up potentially tilting the economy into either

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Speaker 4: recession or just a regime of slower growth.

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Speaker 3: Yeah, I mean, it's it's really hard to gauge, and

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Speaker 3: and that's you know, the key question, you know, how

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Speaker 3: to calibrate policy just enough to get that soft landing.

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Speaker 3: We do think, you know, given our forecast for inflation

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Speaker 3: to come back down quite significantly, significantly. We have head

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Speaker 3: on infision at three percent by the end of the year,

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Speaker 3: we have core inflation between you know, around three point

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Speaker 3: five percent three point three point seven percent by the

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Speaker 3: end of the year, and then when we look into

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Speaker 3: twenty twenty four, a further moderation in inflation. So we

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Speaker 3: do think that given the outlook, you know one, that

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Speaker 3: those rate hikes would be unnecessary in this context.

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Speaker 1: So just lastly quickly, on the core PCE, we're going

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Speaker 1: to get that on Thursday, consensus is four percent, down

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Speaker 1: from four point nine percent the prior period. It's going

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Speaker 1: in the right direction, yes.

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Speaker 3: I mean PC infliction is going in the right direction,

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Speaker 3: and core inflation in general. I think if you look

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Speaker 3: at the rest of the year, we're likely to see

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Speaker 3: headline inflation moving sideways as we got past these base effects,

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Speaker 3: and I think it's the action is really going to

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Speaker 3: happen on the core inflation side, and we're likely to

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Speaker 3: see further on this inflation in core services inflation heading

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Speaker 3: into twenty twenty four.

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Speaker 1: Sounds good to me. I don't know, Lydia Bussor, she's

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Speaker 1: the expert, she's the senior econdomists at ey Parthann kind

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Speaker 1: enough to come into our Bloomberg and Actor Broker study.

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Speaker 1: We appreciate that, Thank you so much, Lydia. Looking at

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Speaker 1: these markets just real quickly, just a little bit of

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Speaker 1: green on the screen, I think people are kind of

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Speaker 1: sitting on the sidelines waiting for what we're gonna see tomorrow.

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Speaker 4: And also on Thursday will be the first reading of

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Speaker 4: second quarter GDP that did get revised a bit higher.

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Speaker 4: If you're looking at the Alana Fed now though, they're

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Speaker 4: thinking it's going to come in around two point four percent. Okay, Yeah,

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Speaker 4: so that's something we've got to keep an eye on.

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Speaker 1: Verste So some decent GDP growth, moderating inflation. What's not that?

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Speaker 3: Like?

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Speaker 5: Listening to the teenth Ken's a live program Bloomberg Markets

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Speaker 5: weekdays at ten am eastering on Bloomberg dot com, the

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Speaker 5: iHeartRadio app and the Bloomberg Business app, or listen on

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Speaker 5: demand wherever you get your podcasts.

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Speaker 1: Let's talk to Dana Peterson because I don't know do

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Speaker 1: we have Danna yet? Because I want to get right

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Speaker 1: to that data.

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Speaker 4: Yeah, she's here, Yeah about that conference consumer confidence, that

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Speaker 4: monthly report that obviously came in around a two year high.

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Speaker 6: There.

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Speaker 1: Yeah, I want to get right to that because it

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Speaker 1: came in and really surprising, I think on the upside.

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Speaker 1: Dana Peterson joints us here. She is the chief economist

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Speaker 1: at the conference board. Dana, talk to us about this

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Speaker 1: consumer confidence data we got today. Something really got everybody's attention.

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Speaker 7: Absolutely, it was definitely stronger than what markets expected. And

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Speaker 7: what's important is that we broke out of that range

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Speaker 7: that we had been in for a very long time,

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Speaker 7: seeing the highest reading SUNS two years ago. And it

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Speaker 7: was not just present situation present confidence being elevated, but

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Speaker 7: it was also expectations. So we saw breakouts for both

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Speaker 7: of the underlying indicators.

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Speaker 3: Here.

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Speaker 4: One thing I'm curious about because last week when you

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Speaker 4: were talking to us about the monthly report, when it

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Speaker 4: comes to the leading economic indicators still pointing toward a

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Speaker 4: potential recession in the US, how do you rectify when

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Speaker 4: you're looking at that data versus when it comes to

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Speaker 4: this sentiment and consumer confidence data.

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Speaker 7: Sure, well, the leading index does include expectations, so probably

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Speaker 7: in the next reading we'll see the improvement in leading indicators,

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Speaker 7: but certainly up through the last measure it's collecting information

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Speaker 7: on the yield curve, which has been negative for some time.

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Speaker 7: It's also collecting a lot of information on manufacturing. We

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Speaker 7: know there is a manufacturing recession going on right now,

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Speaker 7: so it's gathering up that info, and it's also collecting

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Speaker 7: some of the declines we've seen are rather worsening. We've

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Speaker 7: seen in jobless claims, which I mean are still incredibly low,

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Speaker 7: but it does capture monthly movements, and so when you

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Speaker 7: pull all those things together, it's still flashing red for

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Speaker 7: recession at some point over the next year. So it's

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Speaker 7: it's not necessarily inconsistent. Consumers are saying that they're not

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Speaker 7: as concerned about recession going forward, but there's still that

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Speaker 7: risk out there that the leading indicators is showing us.

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Speaker 1: So one of the numbers that really jumped out of me,

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Speaker 1: Dana was the Conference board expectations came in an eighty

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Speaker 1: eight point three. That's versus a revised hire eighty for

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Speaker 1: last period. Put into context what an eighty eight point

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Speaker 1: three means.

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Speaker 7: Yeah, so anything above eighty means that consumers are not

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Speaker 7: expecting recession, and anything below means they are expecting recession

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Speaker 7: within the next six to twelve months, so we've been

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Speaker 7: hanging out below eighty for some time. So it really

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Speaker 7: is significant that we had one reading that was right

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Speaker 7: on the button and then one reading that's been that

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Speaker 7: was notably above.

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Speaker 4: Where are the pain points when it comes to consumers?

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Speaker 4: Because it looks like when it comes to stay some

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Speaker 4: red flags bubbling up, especially when you're looking at auto delinquencies.

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Speaker 4: What is that telling us right now? And at what

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Speaker 4: threshold does it need to end up happening and hit

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Speaker 4: to be more of an issue when it comes to

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Speaker 4: a pullback in consumer spending and what that could mean

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Speaker 4: for the trajectory of GDP.

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Speaker 7: Sure, So I think for you have to break it

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Speaker 7: up into goods and services. For goods, consumers have been

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Speaker 7: feeling the pressure from higher interest rates, and certainly if

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Speaker 7: you're starting to see delinquencies go up, that's because interest

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Speaker 7: rates are rising. So anyone who had been financing something,

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Speaker 7: but usually not a car because that's usually a five

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Speaker 7: year fixed rate, but anything that might be increasing in

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Speaker 7: the rate, then that's going to be a weight on

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Speaker 7: consumers and they're probably going to pull back on durables.

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Speaker 7: So when we look at the six months mooth or

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Speaker 7: moving average, of the conference boards buying indicators, but the

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Speaker 7: most part they're showing some weakness. But we also ask

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Speaker 7: a special question about services and what consumers are saying,

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Speaker 7: and services don't usually get affected by the interest rate,

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Speaker 7: which is a big challenge for the FED. But they're

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Speaker 7: saying there will to buy fewer things that they want

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Speaker 7: and more things that they need. And so I think

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Speaker 7: that's significant in terms of a shift in what people

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Speaker 7: are actually spending on. When it comes to services, they're

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Speaker 7: spending on things that they can't live without and less

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Speaker 7: on the things that they may just desire.

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Speaker 1: Dana, you know the consumer confidence number of one seventeen here,

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Speaker 1: the highest in two years. I would think that a

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Speaker 1: strong labor market has to be a big component of that.

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Speaker 1: Just explain to us how labor kind of weaves into

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Speaker 1: that consumer confidence number.

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Speaker 7: Absolutely, we ask about labor in a number of places.

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Speaker 7: We ask it for the present situation and for the expectations,

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Speaker 7: and in both of those measures, consumers are saying, yes,

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Speaker 7: we think the labor market's doing well in terms of

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Speaker 7: current conditions. There are more jobs out there than we

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Speaker 7: even need, so jobs are easy to get. When it

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Speaker 7: comes to expectations, they're saying, yes, we still think we're

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Speaker 7: going to be employed in the future. And certainly when

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Speaker 7: we ask CEOs what they're doing with respect to the

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Speaker 7: labor market, many of them are still saying they're hiring,

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Speaker 7: and then a lot of them are actually just holding

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Speaker 7: on to workers. They're hoarding workers, they're not looking to

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Speaker 7: let people go. So I think that's also showing up

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Speaker 7: in consumer sentiment of confidence with regard to the labor market.

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Speaker 7: And certainly, if you're working and your wages have risen

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Speaker 7: a bit and you're seeing inflation come off and your

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Speaker 7: real wages a rising, you're going to feel better. And

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Speaker 7: I think that's what's being exhibit here, exhibited here in

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Speaker 7: today's report.

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Speaker 1: Yeah, one of the things that's a new concept to

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Speaker 1: me is hoarding workers. I don't think i've heard of

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Speaker 1: that before. Is that something you economists have seen before.

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Speaker 7: I'm sure that's happened in the past, but this is

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Speaker 7: definitely something that is very noticeable now. And I think

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Speaker 7: the reason why we're having hoarding is because of labor shortages.

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Speaker 7: And many businesses worked really hard to attract labor, and

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Speaker 7: they're also working really hard to retain labor, and so

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Speaker 7: they don't want to let people go, especially if they

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Speaker 7: think that maybe they're might be a recession. But it's

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Speaker 7: not going to be that bad. It's not going to

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Speaker 7: be that long. So if that's the situation, you hold

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Speaker 7: on to your workers, you hold on to your talent,

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Speaker 7: and you don't let them all go and then have

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Speaker 7: to come back six to nine months later and bring

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Speaker 7: them back. We hire them at a higher price point.

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Speaker 7: So that's something that is a phenomenon that I mean,

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Speaker 7: I can't necessarily say if that's ever happened to before.

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Speaker 7: I'm sure it has, but certainly we're seeing it right

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Speaker 7: now and it's an important development that's affecting the labor market.

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Speaker 4: Dana, as an economist, how many more rate increases do

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Speaker 4: you think the US economy can handle as we're waiting

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Speaker 4: on those lagged effects.

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Speaker 7: Well, that's just the thing. It's the Fed has already

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Speaker 7: raised rates by five hundred basis points, and nonetheless, consumers

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Speaker 7: are out there spending and businesses aren't letting people go

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Speaker 7: very much, so the economy can still handle it. So

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Speaker 7: we expect at least two more interest rate hikes from

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Speaker 7: the Fed, definitely this week and then potentially in September.

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Speaker 7: Although that September hike, maybe later if the FED says

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Speaker 7: that they want more time to sit and wait and

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Speaker 7: see how those lags play out. But certainly, for the

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Speaker 7: most part, the economy has been able to manage the

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Speaker 7: increases in interest rates, and it's not clear like how

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Speaker 7: far the FED can go before something, well, the economy

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Speaker 7: itself breaks.

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Speaker 1: So what do you expect or what's what are the

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Speaker 1: good folks at the conference board A conference board expect

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Speaker 1: to hear from FED Chairman j Pal tomorrow.

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Speaker 7: Well, we expect that the chair will say that there

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Speaker 7: have been positive developments. I mean, they're looking at these

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Speaker 7: consumer confidence measures just like we are. We send them

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Speaker 7: to them and they well they get it when everybody

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Speaker 7: else does, is to be clear, and they're looking at that.

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Speaker 7: They're also looking at the fact that CPI inflation has

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Speaker 7: come off. That's not their preferred measure. But they're going

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Speaker 7: to get the BEA data later this week and I'm

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Speaker 7: sure some of the action that we saw in the

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Speaker 7: CPI will be reflected there. So calmer inflation, lower consumer

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Speaker 7: inflation expectations, a more upbeat consumer. Also, we're seeing that, yes,

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Speaker 7: there is this very weak growth in manufacturing, but services

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Speaker 7: are still doing okay. So with all of that, I

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Speaker 7: would say the FED would be pleased with the slowing inflation,

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Speaker 7: but not happy with the ongoing straight that we've seen

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Speaker 7: in the labor market. That's challenging keeping inflation or helping

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Speaker 7: inflation to fall further. So I think with that we're

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Speaker 7: probably going to see another hike, certainly this week, and

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Speaker 7: then another one before year end.

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Speaker 4: We only have about twenty seconds left. But the dissents

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Speaker 4: when it comes to the FED decision, what are you watching?

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Speaker 7: Well, certainly there may be some descents in terms of

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Speaker 7: those who think that the FED is done enough and

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Speaker 7: we should pause. We've heard that, you know, from a

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Speaker 7: number of participants in the FOMC. So it'd be curious

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Speaker 7: to see if they actually put that down on paper

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Speaker 7: and say, look, we've done enough. We need to sit

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Speaker 7: and wait and see how all these lags work through

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Speaker 7: the economy.

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Speaker 1: I would be one of those people, just so you know.

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Speaker 1: Dana Peterson, chief Economists for the Conference Board, joins us here.

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Speaker 1: We appreciate getting her thoughts here. We had some good

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Speaker 1: consumer confidence data coming out from the Conference Board today.

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Speaker 1: One seventeen consensus was for one twelve, so much better

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Speaker 1: than that, and it was the best in two years.

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Speaker 1: So how about that consumer? Hanging in there tough.

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Speaker 5: You're listening to the tape cancer Live program Bloomberg Markets

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Speaker 5: weekdays at ten am Eastern on Bloomberg Radio, the tune

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Speaker 5: flagship New York station Just say Alexa playing Bloomberg eleven thirty.

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Speaker 4: Paul. We have this potential ups strike from workers that

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Speaker 4: might be coming up very soon. So joining us now

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Speaker 4: is Lee Klascow, who at Bloomberg Intelligence, he's the sector

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Speaker 4: head and senior analyst of Free Transportation at BI. Is

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Speaker 4: going to walk us through this. Lee talk to us

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Speaker 4: about what's happening here, where to stocks, where do talks stand,

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Speaker 4: and what should we expect to happen from here out.

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Speaker 8: Yeah, so what we know as of right now is

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Speaker 8: that the two parties are at the negotiating tables. They

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Speaker 8: took a time out because they're really far apart on

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Speaker 8: you know, where we can where part time wages should be.

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Speaker 8: The teamsters wanted significant raises in the ups put its

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Speaker 8: at the time, it's it's best offer on the table,

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Speaker 8: and that wasn't good enough for the teamsters, and so

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Speaker 8: the teamsters walked away from from the table. They've agreed

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Speaker 8: on a lot of a lot of other issues ups also,

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Speaker 8: you know, gave up the recognition of a certain type

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Speaker 8: of driver, you know, to to make it just one

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Speaker 8: class of driver. But it's really now the focus is

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Speaker 8: on the part time aspect pay and you know, you know,

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Speaker 8: we think that cooler heads will prevail. Obviously, as we

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Speaker 8: get closer to that August first deadline, the probability of

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Speaker 8: his strike increases. But you know, from our vantage point,

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Speaker 8: the company under the leadership of Carol to May truly

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Speaker 8: has at least communicated that they're looking for a win

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Speaker 8: win win situation in this negotiation. But I would say

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Speaker 8: the teamsters, you know, the vehetoric out of their camp

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Speaker 8: is a little more aggressive. There's new leadership there, and

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Speaker 8: you know, I think he wants to prove that he's

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Speaker 8: not like the old leadership, which some people might have

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Speaker 8: thought that koutout a little bit too much to the

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Speaker 8: management teams that they were negotiating with.

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Speaker 1: You know, Lee, I'm probably like a lot of people

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Speaker 1: during the pandemic. Every day the UPS guy showed up

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Speaker 1: every day, the FedEx woman showed up, you know with

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Speaker 1: the packages. Talk about essential workers here, does that factor

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Speaker 1: in at all to kind of negotiationship, because I kind

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Speaker 1: of feel like I got to throw these guys a

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Speaker 1: little something extra.

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Speaker 8: Yeah, you know, listen, at the end of the day,

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Speaker 8: during the pandemic, we're essential workers to our everyday lives.

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Speaker 8: Today they are somewhat essential. You know, they deliver healthcare

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Speaker 8: and pharmaceuticals that are important to our everyday life, not

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Speaker 8: just you know, ordering rubber bands from Amazon. But you know,

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Speaker 8: they do do provide a critical role, not only in

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Speaker 8: the economy, but in our lives.

437
00:22:18,280 --> 00:22:18,439
Speaker 3: You know.

438
00:22:18,520 --> 00:22:20,639
Speaker 8: That being said, you know, a UPS part time driver,

439
00:22:21,400 --> 00:22:24,160
Speaker 8: on average, according to the company, makes around twenty bucks

440
00:22:24,160 --> 00:22:26,760
Speaker 8: an hour. And that's not just all they're making. They

441
00:22:26,800 --> 00:22:31,520
Speaker 8: get healthcare and they don't really pay premiums. They get

442
00:22:31,560 --> 00:22:36,800
Speaker 8: to participate in tuition reimbursement and also a retirement plan,

443
00:22:37,000 --> 00:22:39,040
Speaker 8: so you know, there are a lot of benefits. It's

444
00:22:39,080 --> 00:22:41,920
Speaker 8: not just the twenty dollars an hour. You know, currently

445
00:22:41,960 --> 00:22:46,359
Speaker 8: the floor for part time workers fifteen fifty an hour.

446
00:22:47,119 --> 00:22:49,920
Speaker 8: But again, you know, I think the teamsters are looking

447
00:22:49,960 --> 00:22:53,520
Speaker 8: to get that too closer to twenty and you know,

448
00:22:53,760 --> 00:22:55,440
Speaker 8: I think that they're going to find some sort of

449
00:22:55,480 --> 00:22:57,600
Speaker 8: middle ground. You know, I don't really know who if

450
00:22:57,600 --> 00:22:59,520
Speaker 8: there's going to be true winner or a loser. I

451
00:22:59,560 --> 00:23:02,159
Speaker 8: think the part time employees are probably going to be

452
00:23:02,160 --> 00:23:05,320
Speaker 8: earning more, uh. And you know, the union also wants

453
00:23:05,359 --> 00:23:08,240
Speaker 8: to kind of transfer or or create more full time

454
00:23:08,320 --> 00:23:12,040
Speaker 8: jobs and less part time jobs uh for for their member,

455
00:23:12,119 --> 00:23:14,040
Speaker 8: So I think that's something that they're looking to to

456
00:23:14,119 --> 00:23:16,480
Speaker 8: do as well. And you know, the union is also

457
00:23:16,640 --> 00:23:18,680
Speaker 8: looking for maybe you know, kind of like a one

458
00:23:18,760 --> 00:23:22,160
Speaker 8: time benefit for you know, that work that they've done

459
00:23:22,240 --> 00:23:24,880
Speaker 8: during the pandemic that you know, you mentioned a lot

460
00:23:24,920 --> 00:23:27,360
Speaker 8: of them were out there working when when when most

461
00:23:27,400 --> 00:23:29,840
Speaker 8: of us were home, you know, coward in our homes.

462
00:23:30,840 --> 00:23:33,160
Speaker 4: Do we know how close the two sides are at

463
00:23:33,200 --> 00:23:34,199
Speaker 4: potentially reaching a.

464
00:23:34,200 --> 00:23:36,639
Speaker 8: Deal, I mean, I honestly don't.

465
00:23:36,880 --> 00:23:37,080
Speaker 5: You know.

466
00:23:37,160 --> 00:23:40,600
Speaker 8: It really depends on how much either side will bend.

467
00:23:41,480 --> 00:23:45,480
Speaker 8: I'm guessing ups would will will will get closer to

468
00:23:45,560 --> 00:23:49,640
Speaker 8: the twenty dollars mark than you know, uh, than than

469
00:23:49,760 --> 00:23:54,560
Speaker 8: than what uh the team Seris might want. But you know,

470
00:23:54,680 --> 00:23:56,119
Speaker 8: I think they're gonna you know, at the end of

471
00:23:56,119 --> 00:23:57,880
Speaker 8: the day. I don't know, but like I think they're

472
00:23:57,880 --> 00:24:00,359
Speaker 8: gonna they're gonna find some sort of middle ground because

473
00:24:00,359 --> 00:24:02,560
Speaker 8: at the end of the day, you know, while the

474
00:24:02,680 --> 00:24:05,679
Speaker 8: union you know, is threatening a strike, most of the

475
00:24:05,720 --> 00:24:10,000
Speaker 8: workers don't want to strike. It's disruptive for them. You know,

476
00:24:10,600 --> 00:24:13,000
Speaker 8: there are some workers that might cross the picket lines,

477
00:24:13,040 --> 00:24:16,000
Speaker 8: and obviously that that's might not be great from morale.

478
00:24:16,680 --> 00:24:19,639
Speaker 8: They get, you know, a very small stipend when they

479
00:24:19,680 --> 00:24:22,560
Speaker 8: when they strike, something like five or eight five to

480
00:24:22,600 --> 00:24:25,080
Speaker 8: eight hundred dollars a week, which is, you know, not

481
00:24:25,080 --> 00:24:26,680
Speaker 8: not a lot of money, but you know, it's something

482
00:24:27,080 --> 00:24:30,240
Speaker 8: they get and they have families to feed.

483
00:24:30,400 --> 00:24:30,600
Speaker 5: You know.

484
00:24:30,640 --> 00:24:33,320
Speaker 8: If there is a strike, you know, we believe that

485
00:24:33,400 --> 00:24:36,880
Speaker 8: it will be very short in duration. We think anything

486
00:24:36,920 --> 00:24:40,040
Speaker 8: over a week will be extremely disruptive to supply chains.

487
00:24:40,320 --> 00:24:43,199
Speaker 8: Obviously a week strike would still be disruptive to a

488
00:24:43,240 --> 00:24:46,840
Speaker 8: lot of folks, but you know, it could also be

489
00:24:46,880 --> 00:24:50,720
Speaker 8: an opportunity for for UPS's competitors or even other modes

490
00:24:50,760 --> 00:24:54,200
Speaker 8: of transportation to pick up more volumes in an area

491
00:24:54,520 --> 00:24:57,040
Speaker 8: where we're kind of currently in a freight recession because

492
00:24:57,240 --> 00:25:00,280
Speaker 8: freight demand has been down for you know, a least

493
00:25:00,280 --> 00:25:00,760
Speaker 8: a year.

494
00:25:01,359 --> 00:25:04,680
Speaker 4: So then what happens if a deal isn't done by

495
00:25:04,720 --> 00:25:05,880
Speaker 4: August first.

496
00:25:08,119 --> 00:25:10,560
Speaker 8: It depends, Well, there's a couple of things that can happen.

497
00:25:10,600 --> 00:25:13,080
Speaker 8: That the Teamsters can strike like they said they were

498
00:25:13,080 --> 00:25:15,440
Speaker 8: going to, or maybe they can have a cooling off

499
00:25:15,480 --> 00:25:21,560
Speaker 8: period and agree to meet again in a week or two.

500
00:25:22,680 --> 00:25:25,119
Speaker 8: You know, there's a lot of different things that could happen.

501
00:25:25,840 --> 00:25:28,760
Speaker 8: But the rhetoric out of the Teamsters is pretty aggressive

502
00:25:28,800 --> 00:25:30,560
Speaker 8: in terms that you know, they are going to strike

503
00:25:30,600 --> 00:25:34,199
Speaker 8: if there's not an agreement reach. So if there is

504
00:25:34,280 --> 00:25:37,520
Speaker 8: not an agreement reach, I'm assuming that's the likely outcome,

505
00:25:38,440 --> 00:25:41,879
Speaker 8: and you know, politicians, whether it's the Biden administration or

506
00:25:42,280 --> 00:25:46,119
Speaker 8: other organizations, are hard at work making sure that these

507
00:25:46,119 --> 00:25:48,320
Speaker 8: two groups find some sort of common ground and then

508
00:25:48,359 --> 00:25:52,600
Speaker 8: strike doesn't happen. You know, ups touches. It's been estimated

509
00:25:52,640 --> 00:25:56,640
Speaker 8: around five to six percent of of US GDP. I've

510
00:25:56,680 --> 00:25:59,919
Speaker 8: seen some estimates out there on the Bloomberg terminal about

511
00:26:00,440 --> 00:26:03,320
Speaker 8: you know, a strike could add twenty bases points to inflation.

512
00:26:03,720 --> 00:26:07,119
Speaker 8: So obviously, you know, the Biden administration is very cognizant

513
00:26:07,119 --> 00:26:08,880
Speaker 8: of that, and you know they don't want to see

514
00:26:08,880 --> 00:26:12,199
Speaker 8: the derailment of the economy or a soft landing just

515
00:26:12,240 --> 00:26:16,120
Speaker 8: to become a recession. So you know, you know, I'm

516
00:26:16,119 --> 00:26:19,639
Speaker 8: assuming that the Biden administration, through back channels is working

517
00:26:19,760 --> 00:26:22,520
Speaker 8: very hard to try to get the two sides together.

518
00:26:23,280 --> 00:26:25,720
Speaker 1: Leah, I know you also cover the stock of FedEx,

519
00:26:25,720 --> 00:26:28,760
Speaker 1: So what kind of upside would FedEx perhaps see if

520
00:26:28,800 --> 00:26:30,880
Speaker 1: there were or striker? Maybe if there's not a strike,

521
00:26:30,880 --> 00:26:32,920
Speaker 1: I'm just want to hedge my bets here and switch

522
00:26:33,000 --> 00:26:35,119
Speaker 1: my cargo from ups to fed X.

523
00:26:35,880 --> 00:26:37,679
Speaker 8: Yeah, so we all knew, I we all knew this

524
00:26:37,800 --> 00:26:40,080
Speaker 8: negotiation with the team series was coming. So this is

525
00:26:40,119 --> 00:26:41,200
Speaker 8: really is in new news.

526
00:26:42,040 --> 00:26:42,240
Speaker 5: You know.

527
00:26:42,359 --> 00:26:46,240
Speaker 8: FedEx kind of went out to the marketplace and said,

528
00:26:46,240 --> 00:26:47,679
Speaker 8: you know, if you think you're going to need us,

529
00:26:47,720 --> 00:26:50,640
Speaker 8: you better come to us sooner than later. Last month

530
00:26:50,680 --> 00:26:54,720
Speaker 8: and their earnings call, their CMO on the call talked

531
00:26:54,760 --> 00:26:57,000
Speaker 8: about the fact that, you know, while they're not winning

532
00:26:57,000 --> 00:26:59,560
Speaker 8: a lot of share as of right now, it's opening

533
00:26:59,600 --> 00:27:02,640
Speaker 8: a lot of doors to have new conversations with customers

534
00:27:02,680 --> 00:27:05,000
Speaker 8: they might have not talked to. I think net net

535
00:27:05,040 --> 00:27:07,840
Speaker 8: it's going to be a positive for FedEx. You know,

536
00:27:07,840 --> 00:27:10,280
Speaker 8: you're not going to see their volumes jump ten percent,

537
00:27:11,119 --> 00:27:14,639
Speaker 8: you know this quarter because of the strike. Again, assuming

538
00:27:14,640 --> 00:27:16,760
Speaker 8: that it's not a prolonged stripe, because you know, FedEx

539
00:27:16,800 --> 00:27:19,520
Speaker 8: doesn't have like gobs of excess capacity. They're not just

540
00:27:19,560 --> 00:27:21,760
Speaker 8: going to take anything that comes. They have to be

541
00:27:21,880 --> 00:27:24,640
Speaker 8: very choosy about making sure that the freight that they

542
00:27:24,640 --> 00:27:27,560
Speaker 8: do accept into their network is highly profitable freight for them.

543
00:27:28,480 --> 00:27:31,480
Speaker 4: You touched a little bit on what the potential impacts

544
00:27:31,560 --> 00:27:33,600
Speaker 4: could be, but what sort of like rippling effects when

545
00:27:33,640 --> 00:27:35,720
Speaker 4: it comes to package deliveries and things like this could

546
00:27:35,800 --> 00:27:37,919
Speaker 4: end up happening if a deal isn't reached.

547
00:27:39,000 --> 00:27:42,840
Speaker 8: Yeah, So, you know, so if you're if you're a shipper,

548
00:27:42,920 --> 00:27:45,240
Speaker 8: either your stuff is just going to get delayed and

549
00:27:45,280 --> 00:27:46,760
Speaker 8: you're just going to like, Okay, I'm going to wait

550
00:27:46,760 --> 00:27:47,119
Speaker 8: through this.

551
00:27:48,000 --> 00:27:48,199
Speaker 5: You know.

552
00:27:48,320 --> 00:27:51,080
Speaker 8: UPS has has said at least there were press reports

553
00:27:51,119 --> 00:27:55,119
Speaker 8: that they've said that they can handle four million packages

554
00:27:55,160 --> 00:27:58,560
Speaker 8: a day. They do around twenty so and we're talking

555
00:27:58,560 --> 00:28:01,919
Speaker 8: about their domestic business, so you know, we're talking you

556
00:28:01,960 --> 00:28:06,800
Speaker 8: know about you know, twenty percent of their overall volumes.

557
00:28:07,800 --> 00:28:10,080
Speaker 8: You're also going to have people that might be might

558
00:28:10,119 --> 00:28:12,720
Speaker 8: be crossing the picket line, so you know, call that

559
00:28:12,800 --> 00:28:17,000
Speaker 8: five million. So there's there's fifteen, there's fifteen million packages

560
00:28:17,040 --> 00:28:20,359
Speaker 8: a day that are either going to be delayed or loss.

561
00:28:20,440 --> 00:28:22,639
Speaker 8: You know, there's estimates out there that about a third

562
00:28:22,680 --> 00:28:26,760
Speaker 8: of that fifteen million might be lost for good, meaning

563
00:28:26,800 --> 00:28:29,240
Speaker 8: that it might need to find different routes that can

564
00:28:29,280 --> 00:28:32,160
Speaker 8: go through the US Postal Service, you can go through FedEx,

565
00:28:32,240 --> 00:28:35,440
Speaker 8: you can go through there's a lot of regional parcel carriers,

566
00:28:35,720 --> 00:28:39,080
Speaker 8: and it also could benefit truckload and lesson truckload carriers

567
00:28:39,080 --> 00:28:43,560
Speaker 8: because they might be shipping things closer to distribution areas

568
00:28:43,600 --> 00:28:46,080
Speaker 8: and then handing it off to whether the post Office

569
00:28:46,280 --> 00:28:51,040
Speaker 8: or local final mile delivery companies. So you know, a

570
00:28:51,440 --> 00:28:55,120
Speaker 8: disruption would be a benefit to a lot of transportation

571
00:28:55,240 --> 00:28:58,320
Speaker 8: companies that we cover, whether it's you know, the LTL

572
00:28:58,400 --> 00:29:01,680
Speaker 8: space like like an XBO or a Dominion or trucklow

573
00:29:01,760 --> 00:29:04,440
Speaker 8: space like the Knight Swifts of the world, and even

574
00:29:04,440 --> 00:29:06,560
Speaker 8: the brokers, because you know, if you're a shipper and

575
00:29:06,560 --> 00:29:09,600
Speaker 8: you're getting desperate, yeah, to get your free from point

576
00:29:09,680 --> 00:29:11,360
Speaker 8: A to point B, you're going to find all your

577
00:29:11,800 --> 00:29:13,440
Speaker 8: You're going to try to find all your channels. So

578
00:29:13,520 --> 00:29:17,160
Speaker 8: as H Robinson or RXO might might benefit from that.

579
00:29:17,520 --> 00:29:19,680
Speaker 8: And again we're not talking about like there's all going

580
00:29:19,760 --> 00:29:21,720
Speaker 8: to be like a huge jump in volume games. It

581
00:29:21,760 --> 00:29:25,200
Speaker 8: should be like, you know, an incremental positive.

582
00:29:25,080 --> 00:29:27,840
Speaker 1: All right, Lee, great stuff, as always lead classical senior

583
00:29:27,880 --> 00:29:30,560
Speaker 1: transportation analyst for Bloomberg Intelligence.

584
00:29:31,720 --> 00:29:35,560
Speaker 5: You're listening to the Team Ken's line program Bloomberg Markets

585
00:29:35,600 --> 00:29:38,680
Speaker 5: weekdays at ten am Eastern on Bloomberg dot Com, the

586
00:29:38,800 --> 00:29:41,920
Speaker 5: iHeartRadio app and the Bloomberg Business App, or listen on

587
00:29:42,000 --> 00:29:43,920
Speaker 5: demand wherever you get your podcasts.

588
00:29:45,600 --> 00:29:47,640
Speaker 4: I want to move over to our next guest, who's

589
00:29:47,680 --> 00:29:51,400
Speaker 4: in studio with Paul and myself, Scott Kaher, who's head

590
00:29:51,640 --> 00:29:54,600
Speaker 4: of senior Loans at Neuvene, who's joining us to discuss

591
00:29:54,640 --> 00:29:57,320
Speaker 4: the loan activity in the US and the credit quality

592
00:29:57,400 --> 00:30:00,640
Speaker 4: among businesses as well as banks. Talk te us about

593
00:30:00,640 --> 00:30:04,720
Speaker 4: how big the loan asset classes, because I think it's

594
00:30:04,720 --> 00:30:07,080
Speaker 4: something wrong. One and a half trillion dollars when it

595
00:30:07,080 --> 00:30:10,200
Speaker 4: comes to assets. It's actually larger than high yield in

596
00:30:10,280 --> 00:30:12,200
Speaker 4: private credit. And I don't think a lot of people

597
00:30:12,200 --> 00:30:15,560
Speaker 4: actually know what's happening in that space right now, that's correct.

598
00:30:15,640 --> 00:30:18,760
Speaker 9: You know, it's interesting that this is a market that

599
00:30:18,840 --> 00:30:22,280
Speaker 9: has really grown over the last ten years. And if

600
00:30:22,320 --> 00:30:24,880
Speaker 9: you think about what the loan market the broadly syndicated

601
00:30:24,920 --> 00:30:28,960
Speaker 9: loan market really is. It's where US companies that are

602
00:30:28,960 --> 00:30:32,640
Speaker 9: not investment grade go to get financing. And one of

603
00:30:32,680 --> 00:30:35,560
Speaker 9: the things that investors don't really understand about this market

604
00:30:35,680 --> 00:30:39,480
Speaker 9: is if you're investing in this market, you're really buying

605
00:30:40,000 --> 00:30:43,480
Speaker 9: a broad swath of the US economy.

606
00:30:43,560 --> 00:30:43,680
Speaker 4: Right.

607
00:30:43,680 --> 00:30:46,520
Speaker 9: If you think about a lot of the loans that

608
00:30:46,560 --> 00:30:48,760
Speaker 9: are in our portfolios are things you and I touch

609
00:30:48,840 --> 00:30:53,800
Speaker 9: every day, things like Uber, Burger King, Caesar's Entertainment adet.

610
00:30:54,200 --> 00:30:56,120
Speaker 9: You know, if you put in contacts everywhere in BOSH

611
00:30:56,200 --> 00:31:00,840
Speaker 9: and Loan and so you know, these are loans that

612
00:31:00,880 --> 00:31:05,760
Speaker 9: are in many cases public companies, large leading market shares.

613
00:31:06,160 --> 00:31:08,320
Speaker 9: And the other thing that I don't think people really

614
00:31:08,400 --> 00:31:11,800
Speaker 9: understand about the loan market is there two very unique

615
00:31:11,920 --> 00:31:15,959
Speaker 9: qualities that don't exist in other parts of fixed income

616
00:31:16,320 --> 00:31:19,240
Speaker 9: and that they have no duration, right. And so as

617
00:31:19,280 --> 00:31:22,080
Speaker 9: the FED has been raising rates, it has had no

618
00:31:22,320 --> 00:31:26,040
Speaker 9: impact on the price of loans, because as the FED

619
00:31:26,160 --> 00:31:31,440
Speaker 9: raises rates, the overall yield or coupon on loans steps up.

620
00:31:31,760 --> 00:31:35,160
Speaker 9: And the other unique aspect of the loan market is

621
00:31:35,200 --> 00:31:38,240
Speaker 9: that these loans that we're making to these companies are

622
00:31:38,320 --> 00:31:41,840
Speaker 9: first in line to be repaid and so something goes wrong,

623
00:31:42,320 --> 00:31:44,360
Speaker 9: we get paid back first. Just like the mortgage on

624
00:31:44,400 --> 00:31:46,920
Speaker 9: your house. If you choose not to pay back the

625
00:31:46,960 --> 00:31:49,600
Speaker 9: mortgage and the bank comes to get your house, well

626
00:31:49,800 --> 00:31:53,520
Speaker 9: they are going to pay themselves off first to protect themselves.

627
00:31:53,600 --> 00:31:58,320
Speaker 9: And so those very unique factors in the market have

628
00:31:58,520 --> 00:32:04,440
Speaker 9: really allowed for you know, very good volatility in return

629
00:32:04,560 --> 00:32:06,600
Speaker 9: streams over long periods of time.

630
00:32:07,400 --> 00:32:10,160
Speaker 1: So just I've seen, I was fortunate enough to receive

631
00:32:10,240 --> 00:32:12,880
Speaker 1: some of the best credit training on Wall Street and

632
00:32:12,920 --> 00:32:16,080
Speaker 1: that was the Chase Manhattan Bank training program back in

633
00:32:16,080 --> 00:32:18,960
Speaker 1: the day one Chase mant in Plaza, so I can

634
00:32:18,960 --> 00:32:21,520
Speaker 1: handle my own there and I'll end up to six

635
00:32:21,560 --> 00:32:26,000
Speaker 1: times cash flow. About that. What sectors do you guys

636
00:32:26,160 --> 00:32:28,720
Speaker 1: like right now in the senior loan market?

637
00:32:29,000 --> 00:32:29,360
Speaker 3: Sure?

638
00:32:29,600 --> 00:32:32,120
Speaker 9: So you know, what we've really been focused on over

639
00:32:32,120 --> 00:32:35,720
Speaker 9: the last two years is one going back twenty four

640
00:32:35,760 --> 00:32:38,760
Speaker 9: months when inflation was a big problem, right and really

641
00:32:38,800 --> 00:32:42,280
Speaker 9: trying to avoid sectors and sub sectors that were going

642
00:32:42,360 --> 00:32:50,000
Speaker 9: to hit the profitability of certain companies and industries i e. Industrials,

643
00:32:50,200 --> 00:32:54,200
Speaker 9: food and things like that where companies were going to

644
00:32:54,240 --> 00:32:57,120
Speaker 9: get squeezed. And now on the flip side, as we've

645
00:32:57,160 --> 00:33:01,720
Speaker 9: seen inflation really start to abate, come down, and a

646
00:33:01,800 --> 00:33:04,760
Speaker 9: number of those companies, the price of those loans traded

647
00:33:04,800 --> 00:33:07,200
Speaker 9: down because of the rise in inflation and the hit

648
00:33:07,240 --> 00:33:12,120
Speaker 9: to earnings. Really focusing on companies and industries where inflation

649
00:33:12,240 --> 00:33:16,040
Speaker 9: has flipped from a headwind to a tailwind, So think

650
00:33:16,080 --> 00:33:22,040
Speaker 9: about things like industrial food manufacturing companies like that where

651
00:33:22,040 --> 00:33:25,800
Speaker 9: we're really seeing a nice uplift to earnings. But not

652
00:33:25,880 --> 00:33:28,960
Speaker 9: only that, in many cases we've been able to buy

653
00:33:29,160 --> 00:33:33,479
Speaker 9: loans at a discount because again, our market trades. That's

654
00:33:33,520 --> 00:33:35,760
Speaker 9: the other thing I don't think people understand. Our market

655
00:33:35,760 --> 00:33:41,080
Speaker 9: trades every single day. We have transparency on the price

656
00:33:41,120 --> 00:33:42,520
Speaker 9: of our loans, so we can go in if a

657
00:33:42,560 --> 00:33:46,040
Speaker 9: company misses numbers, if there are operational issues and a

658
00:33:46,080 --> 00:33:49,280
Speaker 9: loan trades down five, ten, fifteen points, we can go

659
00:33:49,320 --> 00:33:52,040
Speaker 9: in and buy and sell those loans every single day.

660
00:33:52,120 --> 00:33:55,160
Speaker 9: And so what we were doing going back eight to

661
00:33:55,160 --> 00:33:59,280
Speaker 9: twelve months as we saw the inflection, as we anticipated

662
00:33:59,360 --> 00:34:02,440
Speaker 9: numbers starting to get better, able to buy loans in

663
00:34:02,480 --> 00:34:06,880
Speaker 9: the high eighties, low nineties with very nice yields in

664
00:34:06,920 --> 00:34:10,359
Speaker 9: the double digits, and as inflation has come down and

665
00:34:10,400 --> 00:34:13,879
Speaker 9: earnings that has inflected. We've really been able to find

666
00:34:13,880 --> 00:34:16,120
Speaker 9: some opportunities that have traded up very nicely.

667
00:34:16,360 --> 00:34:20,520
Speaker 4: So then why don't retail investors have exposure to that space?

668
00:34:20,600 --> 00:34:23,160
Speaker 4: Is it just something that's maybe not as sexy of

669
00:34:23,239 --> 00:34:26,160
Speaker 4: an maybe asset class is when you're thinking about some

670
00:34:26,200 --> 00:34:28,600
Speaker 4: of these high flyers in the stock market.

671
00:34:28,760 --> 00:34:31,719
Speaker 9: Yes, it's a great question, and candidly it's a little

672
00:34:31,719 --> 00:34:33,719
Speaker 9: bit of a head scratcher as to why. I think

673
00:34:33,719 --> 00:34:37,200
Speaker 9: one of the reasons is irregular investors cannot go buy

674
00:34:37,320 --> 00:34:40,880
Speaker 9: an individual alone. They have to buy a mutual fund

675
00:34:41,120 --> 00:34:44,640
Speaker 9: or an ETF. And so what I think has happened

676
00:34:45,120 --> 00:34:47,759
Speaker 9: is in the institutional space, what we've seen over the

677
00:34:47,840 --> 00:34:53,799
Speaker 9: last ten years is institutional pension funds, endowments, they've doubled

678
00:34:54,120 --> 00:34:56,560
Speaker 9: their exposure to the loan market. It's gone from just

679
00:34:56,640 --> 00:35:00,759
Speaker 9: over two hundred billion dollars to over four hundred billion dollars.

680
00:35:01,200 --> 00:35:04,880
Speaker 9: Retail investors, on the other hand, their exposure to the

681
00:35:04,920 --> 00:35:08,960
Speaker 9: loan market has essentially flatlined. And so retail investors only

682
00:35:08,960 --> 00:35:13,480
Speaker 9: own about six percent of the loan market. And in

683
00:35:13,520 --> 00:35:16,040
Speaker 9: my opinion, and maybe I'm a little bit biased, but

684
00:35:16,080 --> 00:35:20,520
Speaker 9: if you think about what it offers floating rate zero

685
00:35:20,640 --> 00:35:26,800
Speaker 9: correlation to the Barclays AG very low volatility relative. Yes, yes,

686
00:35:27,239 --> 00:35:31,319
Speaker 9: and so there's zero correlation to that AG right. It's

687
00:35:31,320 --> 00:35:35,040
Speaker 9: also it's outperformed that index by over twenty percent over

688
00:35:35,080 --> 00:35:37,840
Speaker 9: the last two years. But all of the return in

689
00:35:37,960 --> 00:35:43,399
Speaker 9: volatility characteristics are something that we think is incredibly important

690
00:35:43,920 --> 00:35:46,920
Speaker 9: for retail investors to understand and appreciate and add to

691
00:35:46,960 --> 00:35:53,080
Speaker 9: their portfolios, just like institutional investors have recognized and allocated

692
00:35:53,120 --> 00:35:54,720
Speaker 9: to over the last ten years.

693
00:35:55,040 --> 00:35:58,719
Speaker 1: Scott about thirty seconds left. Private credit has been a

694
00:35:58,719 --> 00:36:02,040
Speaker 1: big market. We've seen the so much money flow to

695
00:36:02,080 --> 00:36:04,280
Speaker 1: the private credit business. How does that impact your business?

696
00:36:05,239 --> 00:36:08,359
Speaker 9: You know, it has not impacted it really to any

697
00:36:08,480 --> 00:36:11,560
Speaker 9: large degree. Private credit has Certainly.

698
00:36:11,840 --> 00:36:14,200
Speaker 1: They don't do they syndicate their loans out to you guys.

699
00:36:15,840 --> 00:36:20,799
Speaker 9: No, no, so private credit will put those loans on

700
00:36:20,880 --> 00:36:23,600
Speaker 9: their balance sheets and hold those until maturity. There's also

701
00:36:23,680 --> 00:36:26,520
Speaker 9: they don't those loans don't trade, and so the public

702
00:36:26,520 --> 00:36:30,160
Speaker 9: market in the private market are really learning to coexist.

703
00:36:30,320 --> 00:36:35,600
Speaker 9: There's a lot of important and attractive characteristics of the

704
00:36:35,640 --> 00:36:38,720
Speaker 9: private market just like there are in the public markets,

705
00:36:38,760 --> 00:36:41,160
Speaker 9: and they're very much complementary. So what you're going to

706
00:36:41,200 --> 00:36:44,440
Speaker 9: see going forward. Is the public market in the private

707
00:36:44,480 --> 00:36:49,480
Speaker 9: market really coexisting in offering unique characteristics that we think

708
00:36:49,600 --> 00:36:53,719
Speaker 9: investors will recognize and allocate both to private and to

709
00:36:53,760 --> 00:36:54,480
Speaker 9: public credit.

710
00:36:54,760 --> 00:36:56,920
Speaker 1: Great stuff, Scott, thanks very much for coming in here.

711
00:36:57,000 --> 00:37:00,440
Speaker 1: Really appreciate it. Scott Kahert, head of Senior Loans at

712
00:37:00,520 --> 00:37:03,640
Speaker 1: Neuvene and assa class that we don't talk about enough,

713
00:37:03,680 --> 00:37:06,040
Speaker 1: but it's us near and dear to my heart. I

714
00:37:06,080 --> 00:37:08,640
Speaker 1: love the old credit alms credits hard and equity soft.

715
00:37:08,640 --> 00:37:10,600
Speaker 1: I heard that a number of times. This is Bloomberg.

716
00:37:10,920 --> 00:37:14,040
Speaker 5: You're listening to the tape. Cat's are live program Bloomberg

717
00:37:14,080 --> 00:37:17,680
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

718
00:37:17,719 --> 00:37:20,959
Speaker 5: tune in app, Bloomberg dot com, and the Bloomberg Business App.

719
00:37:21,000 --> 00:37:23,839
Speaker 5: You can also listen live on Amazon Alexa from our

720
00:37:23,840 --> 00:37:28,920
Speaker 5: flagship New York station, just say Alexa playing Bloomberg eleven thirty.

721
00:37:29,800 --> 00:37:32,520
Speaker 1: Very difficult to be a media investor these days. I

722
00:37:32,560 --> 00:37:35,319
Speaker 1: follow this sector for more than thirty years. Todays is

723
00:37:35,400 --> 00:37:37,440
Speaker 1: as tough as it's ever been. You've got this whole

724
00:37:37,600 --> 00:37:42,080
Speaker 1: business model evolution or you know, switching from the core

725
00:37:42,600 --> 00:37:44,880
Speaker 1: you know, cable TV model now to the streaming model.

726
00:37:45,120 --> 00:37:47,640
Speaker 1: You don't know where those economics are going. And now

727
00:37:47,640 --> 00:37:50,520
Speaker 1: you've got a couple of strikes in the industry, one

728
00:37:50,520 --> 00:37:52,400
Speaker 1: with the writers, another with the actors. We want to

729
00:37:52,400 --> 00:37:54,120
Speaker 1: get kind of the latest on what's going on there,

730
00:37:54,200 --> 00:37:56,560
Speaker 1: what's really some of the fundamental issues here. And we're

731
00:37:56,640 --> 00:38:00,920
Speaker 1: joined by Lisa Takayuchi Cullen, vice president of Film, TV

732
00:38:01,040 --> 00:38:04,840
Speaker 1: and Streaming for the Writer's Guild of America East. So

733
00:38:04,840 --> 00:38:06,279
Speaker 1: I'm basing, I guess, and that's kind of a New

734
00:38:06,360 --> 00:38:09,040
Speaker 1: York thing. Lisa, thanks so much for joining us from

735
00:38:09,040 --> 00:38:12,120
Speaker 1: the writer's perspective. Can you kind of just frame out

736
00:38:12,160 --> 00:38:15,319
Speaker 1: for us what your issues are with the indusue or

737
00:38:15,320 --> 00:38:18,120
Speaker 1: what the issues are with the media companies.

738
00:38:19,920 --> 00:38:24,440
Speaker 6: Sure, our main issue is compensation as the issue for

739
00:38:24,520 --> 00:38:27,279
Speaker 6: I think a lot of workers across America today, our

740
00:38:27,320 --> 00:38:30,800
Speaker 6: compensation has been eroding in a time of what people

741
00:38:30,840 --> 00:38:35,439
Speaker 6: consider peak entertainment, peak television, peak film. There are record

742
00:38:35,560 --> 00:38:38,480
Speaker 6: numbers of people going to see these things and watching

743
00:38:38,560 --> 00:38:43,120
Speaker 6: them on streaming at home and record profits, record revenues,

744
00:38:43,239 --> 00:38:46,200
Speaker 6: while meanwhile, the people who create the content have been

745
00:38:46,200 --> 00:38:50,560
Speaker 6: making less and less. TV writers in particular are making

746
00:38:50,640 --> 00:38:53,359
Speaker 6: and justin for inflation about twenty five percent less than

747
00:38:53,360 --> 00:38:55,319
Speaker 6: they were ten years ago. And this is a time

748
00:38:55,520 --> 00:38:58,719
Speaker 6: when television has been exploding as a medium and as

749
00:38:58,760 --> 00:39:02,799
Speaker 6: companies have been raking in the revenues and profits. So

750
00:39:02,920 --> 00:39:05,440
Speaker 6: all we're asking for, really, just like the actors, just

751
00:39:05,520 --> 00:39:08,200
Speaker 6: like the crew, just like the teamsters, is our fair

752
00:39:08,239 --> 00:39:10,000
Speaker 6: share of the product that we create.

753
00:39:10,600 --> 00:39:13,400
Speaker 4: And what specifically are you when you come to the

754
00:39:13,400 --> 00:39:15,600
Speaker 4: writers are they looking for to get back to work?

755
00:39:15,640 --> 00:39:16,919
Speaker 4: What are the demands right now?

756
00:39:18,160 --> 00:39:21,600
Speaker 6: The demands are that the studios meet our proposals and

757
00:39:22,480 --> 00:39:25,640
Speaker 6: actually engage in negotiation on them. Our proposals remain exactly

758
00:39:25,640 --> 00:39:28,040
Speaker 6: what they were when we began the strike on May first.

759
00:39:28,160 --> 00:39:31,080
Speaker 1: And can you summarize kind of what they are? The

760
00:39:31,120 --> 00:39:31,920
Speaker 1: main proposals?

761
00:39:32,640 --> 00:39:37,000
Speaker 6: Sure, The main one is raised in our minimum rates.

762
00:39:37,400 --> 00:39:39,720
Speaker 6: The contract that we work under is called the Minimum

763
00:39:39,719 --> 00:39:43,760
Speaker 6: Basic Agreement, and essentially it outlines what the minimum rates

764
00:39:43,800 --> 00:39:48,360
Speaker 6: can be for film and TV writing in our industry.

765
00:39:48,520 --> 00:39:51,600
Speaker 6: And we are trying to negotiate a hike in those

766
00:39:51,680 --> 00:39:56,480
Speaker 6: rates because, adjusting again for the spiking inflation, writers are

767
00:39:56,480 --> 00:39:58,840
Speaker 6: making far less than they were to a point that

768
00:39:59,760 --> 00:40:02,680
Speaker 6: it is simply not sustainable. We have members who cannot

769
00:40:02,680 --> 00:40:05,919
Speaker 6: make the rent who are on actual food stamps. People

770
00:40:06,000 --> 00:40:08,160
Speaker 6: don't think of that when they think of Hollywood. They

771
00:40:08,200 --> 00:40:10,600
Speaker 6: think that life is glamorous and that we're all rich

772
00:40:10,719 --> 00:40:14,760
Speaker 6: and we own yachts and private jets, and most of

773
00:40:14,840 --> 00:40:18,879
Speaker 6: are working people are middle class. If that now most

774
00:40:18,880 --> 00:40:21,960
Speaker 6: of them are struggling to maintain a toe hold in

775
00:40:22,040 --> 00:40:24,960
Speaker 6: the middle class. So it is raising our minimum rates.

776
00:40:25,480 --> 00:40:30,200
Speaker 6: It is adjusting residuals for this age of streaming. That

777
00:40:30,360 --> 00:40:34,360
Speaker 6: is a huge issue for both the writers and the actors.

778
00:40:34,680 --> 00:40:37,680
Speaker 6: We are not seeing anywhere close to the residuals that

779
00:40:37,920 --> 00:40:41,839
Speaker 6: kept us afloat for decades back in the days when

780
00:40:42,080 --> 00:40:45,280
Speaker 6: the model was not broken. But all of the studios

781
00:40:45,320 --> 00:40:49,839
Speaker 6: jumped on the streaming bandwagon, and now here we are

782
00:40:49,880 --> 00:40:52,080
Speaker 6: with this broken system where none of us are being

783
00:40:52,080 --> 00:40:54,560
Speaker 6: compensated in a way that allows us to live. We're

784
00:40:54,600 --> 00:40:58,919
Speaker 6: also fighting for some sustainability in our careers in both

785
00:40:58,960 --> 00:41:02,880
Speaker 6: film and television. We have seen our ability to manage

786
00:41:02,880 --> 00:41:06,160
Speaker 6: our work and to create, you know, with our own

787
00:41:06,160 --> 00:41:10,000
Speaker 6: creative licensing road TV writers are no longer allowed on

788
00:41:10,160 --> 00:41:13,080
Speaker 6: sets if they're working on streaming shows because of the

789
00:41:13,200 --> 00:41:15,960
Speaker 6: long delay in between a writer's room and when the

790
00:41:16,000 --> 00:41:20,800
Speaker 6: actual production occurs. We're fighting for growth in the size

791
00:41:20,880 --> 00:41:24,200
Speaker 6: of a writer's room, which is the room that convenes

792
00:41:24,239 --> 00:41:26,880
Speaker 6: before a television show is made in order for writers

793
00:41:26,920 --> 00:41:28,759
Speaker 6: to come up with the plot and to write all

794
00:41:28,760 --> 00:41:32,320
Speaker 6: of the episodes. The rooms are becoming smaller and smaller

795
00:41:32,400 --> 00:41:36,279
Speaker 6: as the streaming budgets for writing shrink. And I say

796
00:41:36,280 --> 00:41:41,600
Speaker 6: for writing because streaming budgets for shows and movies have exploded.

797
00:41:41,840 --> 00:41:44,759
Speaker 6: Studios are spending what nineteen billion dollars a year on

798
00:41:45,800 --> 00:41:49,759
Speaker 6: actually making these shows and movies. But the pie, the

799
00:41:49,800 --> 00:41:52,560
Speaker 6: slices of the pie that writers are getting, is getting

800
00:41:52,640 --> 00:41:54,720
Speaker 6: smaller and smaller. So we're fighting for all of those.

801
00:41:54,520 --> 00:41:57,839
Speaker 1: Things, Lisa. You know, I've covered the media industry as

802
00:41:57,840 --> 00:41:59,799
Speaker 1: a financial analyst for more than thirty years, and I've

803
00:41:59,800 --> 00:42:02,560
Speaker 1: never seen an industry that has so much uncertainty in

804
00:42:02,840 --> 00:42:06,640
Speaker 1: the core business model. If I were an executive at

805
00:42:06,040 --> 00:42:10,920
Speaker 1: a media company, my response might be our model is broken,

806
00:42:11,960 --> 00:42:14,360
Speaker 1: and we don't know what the profitability of streaming is.

807
00:42:14,560 --> 00:42:16,680
Speaker 1: We don't know how people are going to consume media

808
00:42:16,719 --> 00:42:19,840
Speaker 1: going forward. We're trying to adapt from what you mentioned

809
00:42:19,960 --> 00:42:22,480
Speaker 1: correctly before, which is, you know, the traditional model that

810
00:42:22,520 --> 00:42:24,320
Speaker 1: we all grew up with whether it was it was

811
00:42:24,320 --> 00:42:27,279
Speaker 1: supported by cable subscriptions and one hundred million households paying

812
00:42:27,320 --> 00:42:30,640
Speaker 1: money every month. That model's pretty much gone away. Now

813
00:42:30,680 --> 00:42:33,279
Speaker 1: we're trying to replace it with this streaming model, but

814
00:42:33,360 --> 00:42:35,879
Speaker 1: the economics are uncertain. Is there any do you guys?

815
00:42:36,560 --> 00:42:40,239
Speaker 1: Is that an argument that resonates with you guys at all?

816
00:42:41,320 --> 00:42:43,280
Speaker 6: No, that's not our problem, right, I'm not the CEO

817
00:42:43,360 --> 00:42:46,200
Speaker 6: of the company. I'm not the one who chose to

818
00:42:46,360 --> 00:42:50,640
Speaker 6: enter into a major merger with another company or takeover

819
00:42:50,680 --> 00:42:53,040
Speaker 6: of another company that places my company into a great

820
00:42:53,040 --> 00:42:54,919
Speaker 6: amount of debts and now I'm not able to pay

821
00:42:54,960 --> 00:42:59,920
Speaker 6: my bills. The companies are still making profits hand over fists,

822
00:43:00,280 --> 00:43:04,440
Speaker 6: handover fist. They are still breaking in what is it now?

823
00:43:04,520 --> 00:43:08,640
Speaker 6: I think thirty billion dollars in profits from entertainment alone,

824
00:43:08,680 --> 00:43:12,400
Speaker 6: And I'm not talking about Amazon's packaging business or Apple's

825
00:43:12,400 --> 00:43:16,759
Speaker 6: computer business. From the studio companies, from the profits that

826
00:43:16,760 --> 00:43:20,280
Speaker 6: they make just off of the product that we create.

827
00:43:20,280 --> 00:43:23,279
Speaker 6: They're making thirty billion dollars in profits a year. So

828
00:43:23,760 --> 00:43:26,919
Speaker 6: they're the ones who have to lie in the bed

829
00:43:26,960 --> 00:43:30,400
Speaker 6: that they made. But it doesn't excuse them from having

830
00:43:30,440 --> 00:43:33,320
Speaker 6: to pay their labor fairly.

831
00:43:33,640 --> 00:43:33,799
Speaker 3: Right.

832
00:43:34,840 --> 00:43:38,239
Speaker 4: How has the rise of streaming affected writer's compensation.

833
00:43:40,040 --> 00:43:44,800
Speaker 6: It has decimated writers compensation. Streaming has changed the way

834
00:43:44,840 --> 00:43:47,200
Speaker 6: that we work. It used to be that under the

835
00:43:47,280 --> 00:43:51,840
Speaker 6: network broadcast model, that writers could be employed forty forty

836
00:43:51,840 --> 00:43:55,799
Speaker 6: five fifty weeks a year because the television shows would

837
00:43:55,840 --> 00:43:59,759
Speaker 6: run for twenty episodes, twenty two episodes, twenty three and

838
00:44:00,160 --> 00:44:03,719
Speaker 6: the rooms would would convene in the early summer, and

839
00:44:03,760 --> 00:44:05,719
Speaker 6: they would run through the spring, and then there will

840
00:44:05,760 --> 00:44:08,279
Speaker 6: be a short break in between. Not only would we

841
00:44:08,360 --> 00:44:13,799
Speaker 6: make the weekly pay that would sustain a middle class lifestyle,

842
00:44:14,080 --> 00:44:17,160
Speaker 6: we also would make residuals, meaning that when those shows

843
00:44:17,160 --> 00:44:20,960
Speaker 6: were read broadcast in foreign markets or on cable television,

844
00:44:21,040 --> 00:44:24,040
Speaker 6: we would receive checks in the off times that perhaps

845
00:44:24,120 --> 00:44:25,640
Speaker 6: we are not working on a show, or perhaps we're

846
00:44:25,680 --> 00:44:29,320
Speaker 6: on a hiatus, that would pay our bills and continue

847
00:44:29,360 --> 00:44:32,640
Speaker 6: to sustain a decent lifestyle. All of that has gone away.

848
00:44:32,840 --> 00:44:35,680
Speaker 6: Streaming has introduced the idea of what's called a mini room,

849
00:44:35,840 --> 00:44:39,279
Speaker 6: which is a studio concept that is mini in every way,

850
00:44:39,360 --> 00:44:42,759
Speaker 6: mini in size, mini in duration, mini in pay, and

851
00:44:42,800 --> 00:44:45,480
Speaker 6: that means you gather together a very small number of

852
00:44:45,480 --> 00:44:48,200
Speaker 6: writers and you pay them at the minimum rate allowed

853
00:44:48,239 --> 00:44:52,760
Speaker 6: in our contract to produce ten episodes, and I say produced,

854
00:44:52,760 --> 00:44:55,000
Speaker 6: meaning right, they're not actually producing it because again the

855
00:44:55,000 --> 00:44:58,360
Speaker 6: production occurs much later. But they're writing, say, ten episodes

856
00:44:58,360 --> 00:45:02,439
Speaker 6: of television in ten weeks, and then they're sent off

857
00:45:02,480 --> 00:45:04,480
Speaker 6: to you know, to try to fend for themselves for

858
00:45:04,480 --> 00:45:06,480
Speaker 6: the rest of the year, and that is simply not sustainable.

859
00:45:06,600 --> 00:45:08,880
Speaker 1: Lisa, how far apart based on your understanding, how far

860
00:45:08,920 --> 00:45:13,480
Speaker 1: apart are is the union and the industry? And second,

861
00:45:13,480 --> 00:45:16,080
Speaker 1: how long are is the union prepared to stay out?

862
00:45:17,120 --> 00:45:19,600
Speaker 6: Sure? So, as an officer of the guild, I have

863
00:45:19,680 --> 00:45:22,040
Speaker 6: been involved in the negotiations from the start, and I

864
00:45:22,160 --> 00:45:25,719
Speaker 6: will say that that the studios simply refuse to even

865
00:45:25,760 --> 00:45:28,399
Speaker 6: engage with us on our core issues. So I would

866
00:45:28,400 --> 00:45:31,440
Speaker 6: say we're still far apart until they come back to

867
00:45:31,520 --> 00:45:34,560
Speaker 6: us and say, okay, we hear you on your core issues.

868
00:45:34,640 --> 00:45:37,680
Speaker 6: This is our counteroffer, and then we can come back

869
00:45:37,719 --> 00:45:40,440
Speaker 6: with another counter offer. That's what a negotiation is.

870
00:45:40,480 --> 00:45:40,960
Speaker 3: And they have.

871
00:45:41,080 --> 00:45:44,279
Speaker 6: Refused to even negotiate on those points. So we do

872
00:45:44,400 --> 00:45:46,880
Speaker 6: need to get there as far as how long we

873
00:45:47,080 --> 00:45:50,480
Speaker 6: are willing to stay out. I talk to membership every

874
00:45:50,520 --> 00:45:52,879
Speaker 6: single day, as do the other officers. And the other

875
00:45:52,920 --> 00:45:55,520
Speaker 6: members of the negotiating committee and the other elected officials.

876
00:45:55,800 --> 00:45:59,480
Speaker 6: And our unity is strong. Our solidarity is strong now

877
00:45:59,480 --> 00:46:01,759
Speaker 6: that we have had one hundred and sixty thousand reinforcements.

878
00:46:01,760 --> 00:46:04,760
Speaker 6: When say After joined us on the line, the feeling

879
00:46:04,880 --> 00:46:06,640
Speaker 6: is that we have to get what we came for.

880
00:46:06,840 --> 00:46:08,600
Speaker 6: We have to get what we came for or else

881
00:46:09,040 --> 00:46:11,600
Speaker 6: it is an absolutely an existential crisis for us. The

882
00:46:11,960 --> 00:46:15,000
Speaker 6: career of writing for Hollywood will no longer exist. So

883
00:46:15,000 --> 00:46:17,160
Speaker 6: I believe that we are willing to do what it takes.

884
00:46:17,239 --> 00:46:18,960
Speaker 1: All right, Lisa, thank you very much for taking the time.

885
00:46:19,000 --> 00:46:22,600
Speaker 1: Really appreciate. I know what's a contentious issue on both sides,

886
00:46:22,600 --> 00:46:26,640
Speaker 1: and hopefully both sides can come to an agreement sooner

887
00:46:26,719 --> 00:46:29,239
Speaker 1: rather than later. A lot of jobs at stake and

888
00:46:29,320 --> 00:46:30,760
Speaker 1: a lot of folks are depending upon.

889
00:46:30,600 --> 00:46:33,640
Speaker 5: Its you're listening to the tape Can's are Live program

890
00:46:33,680 --> 00:46:37,640
Speaker 5: Bloomberg Markets weekdays at ten am Eastern on Bloomberg Radio,

891
00:46:37,800 --> 00:46:40,520
Speaker 5: the tune in app, Bloomberg dot Com, and the Bloomberg

892
00:46:40,560 --> 00:46:43,680
Speaker 5: Business App. You can also listen live on Amazon Alexa

893
00:46:43,719 --> 00:46:47,000
Speaker 5: from our flagship New York station, Just Say Alexa Play

894
00:46:47,120 --> 00:46:48,719
Speaker 5: Bloomberg eleven thirty.

895
00:46:50,200 --> 00:46:53,480
Speaker 1: Jessy. Here's our next guest. Here's a who's who of

896
00:46:53,520 --> 00:46:59,920
Speaker 1: some of the top names on Wall Street. Salomon Brothers, Oppenheimer, Goldman, Sachs,

897
00:47:00,560 --> 00:47:03,680
Speaker 1: Government of Singapore as we kids call them, one gic

898
00:47:04,360 --> 00:47:07,239
Speaker 1: Lehman Brothers. And now for the last I don't know,

899
00:47:07,360 --> 00:47:10,560
Speaker 1: thirteen fourteen years, Bloomberg Intelligence.

900
00:47:10,600 --> 00:47:11,879
Speaker 4: It's quite the CV hop.

901
00:47:12,280 --> 00:47:17,360
Speaker 1: Top machinery analyst on Wall Street bar none Karen Uberheart,

902
00:47:17,400 --> 00:47:19,960
Speaker 1: and she's here on our Bloomberg Interactive Broker studio. She's

903
00:47:20,000 --> 00:47:23,160
Speaker 1: been covering machinery and all that kind of industrial stuff

904
00:47:23,200 --> 00:47:24,000
Speaker 1: that we make.

905
00:47:24,680 --> 00:47:26,440
Speaker 4: For Helltale Signs of the economy.

906
00:47:26,560 --> 00:47:29,520
Speaker 1: Exactly right, Karen, thanks for joining us here. Let's talk

907
00:47:29,520 --> 00:47:31,920
Speaker 1: about a company that we don't talk about enough, but

908
00:47:31,960 --> 00:47:35,920
Speaker 1: it's one of Tom Keen's favorites, Minnesota Mining and Manufacturing

909
00:47:36,040 --> 00:47:38,360
Speaker 1: three M. They has some good numbers today.

910
00:47:38,960 --> 00:47:42,840
Speaker 10: Yeah, they are. They have a big consumer exposure, so

911
00:47:42,840 --> 00:47:45,920
Speaker 10: they're organic growth was actually down, but down less and expected,

912
00:47:46,280 --> 00:47:48,840
Speaker 10: and they delivered. On the margin side. They've done a

913
00:47:48,920 --> 00:47:52,600
Speaker 10: huge restructuring. It seems to be gaining some traction and

914
00:47:52,640 --> 00:47:55,680
Speaker 10: also expectations are so low for three M now since

915
00:47:55,719 --> 00:47:58,880
Speaker 10: they've had a lot of problems particularly the litigation problems.

916
00:47:59,080 --> 00:48:04,480
Speaker 1: Boy, they're in everything safety and industrial, transportation, electronics, healthcare, consumer.

917
00:48:05,160 --> 00:48:08,440
Speaker 1: This is the conglomerate, right yeah, yeah, which.

918
00:48:08,320 --> 00:48:12,560
Speaker 10: They make everything from the post it's to grinding wheels.

919
00:48:12,719 --> 00:48:12,919
Speaker 3: Yeah.

920
00:48:13,120 --> 00:48:14,160
Speaker 10: Literally our GDP.

921
00:48:14,440 --> 00:48:17,680
Speaker 4: I mean, looking at that stock ticker symbol M up

922
00:48:17,719 --> 00:48:20,640
Speaker 4: about five percent so on Pacepert's best days since the

923
00:48:20,680 --> 00:48:22,640
Speaker 4: beginning of June. You look at it stock though, you're

924
00:48:22,680 --> 00:48:25,640
Speaker 4: to date down close to nine percent. What's the story there?

925
00:48:26,040 --> 00:48:31,560
Speaker 10: They have a tens of billions of dollars litigation problem

926
00:48:31,640 --> 00:48:37,280
Speaker 10: for environmental p Fast is the name of the chemical

927
00:48:37,560 --> 00:48:41,160
Speaker 10: that has been hurting water, and so that's that could

928
00:48:41,160 --> 00:48:43,680
Speaker 10: be twenty twenty five billion dollars. They've got another one

929
00:48:43,719 --> 00:48:48,520
Speaker 10: on a ear plugs for the military. So they've got

930
00:48:48,560 --> 00:48:54,160
Speaker 10: a lingering thirty billion, forty billion plus litigation that potentially

931
00:48:54,200 --> 00:48:55,960
Speaker 10: they would have to pay over a long period of time.

932
00:48:56,280 --> 00:48:59,279
Speaker 10: That's the biggest problem. And then they've also disappointed on

933
00:48:59,480 --> 00:49:02,480
Speaker 10: you know, we're on performance on operating, but we've had

934
00:49:02,520 --> 00:49:04,880
Speaker 10: two quarters now where they beat on revenue and they

935
00:49:04,920 --> 00:49:07,160
Speaker 10: beat a lot on earning. So I think the reason

936
00:49:07,160 --> 00:49:09,000
Speaker 10: it's up is people are saying, oh, is it coming

937
00:49:09,040 --> 00:49:10,480
Speaker 10: together on the operating.

938
00:49:10,080 --> 00:49:13,440
Speaker 1: Side Saint Paul, Minnesota. The home, great town. I love

939
00:49:13,480 --> 00:49:16,440
Speaker 1: Saint Paul. All right, great hotel, I can't remember the

940
00:49:16,520 --> 00:49:17,799
Speaker 1: name of it, but that's where you always stay when

941
00:49:17,800 --> 00:49:20,759
Speaker 1: you go to marketing in Saint Paul. All right, let's

942
00:49:20,800 --> 00:49:24,600
Speaker 1: go to GE. What is GE today? Tell us what

943
00:49:24,600 --> 00:49:26,720
Speaker 1: they own because all I remember, it's been an investment

944
00:49:26,760 --> 00:49:29,239
Speaker 1: banker's dream, just selling off businesses left and right. So

945
00:49:29,280 --> 00:49:31,040
Speaker 1: I'm not sure what's left? And then what do you

946
00:49:31,080 --> 00:49:32,040
Speaker 1: expect from their earnings?

947
00:49:32,200 --> 00:49:34,919
Speaker 10: When I started covering, they were in eight businesses. They're

948
00:49:34,960 --> 00:49:36,719
Speaker 10: now in three, and they're about to be in one.

949
00:49:37,680 --> 00:49:41,040
Speaker 10: What's left is aerospace that will be a standalone company.

950
00:49:41,320 --> 00:49:45,279
Speaker 10: And then what they're calling an energy company, and it's

951
00:49:45,280 --> 00:49:48,320
Speaker 10: basically renewables and their big power business. The turbine is

952
00:49:48,320 --> 00:49:50,480
Speaker 10: a big turbines, that's what's left. Those are going to

953
00:49:50,560 --> 00:49:52,560
Speaker 10: go together, and aerospace is going to stand alone.

954
00:49:52,760 --> 00:49:55,920
Speaker 1: That's what's left. Really, so the GE will just be

955
00:49:56,440 --> 00:49:59,960
Speaker 1: a pure play. Okay, aerospace, all right, So talk to

956
00:50:00,160 --> 00:50:02,480
Speaker 1: about kind of what's left and how's it're performing. And

957
00:50:02,640 --> 00:50:05,160
Speaker 1: they're going to be reporting earnings. What are we looking for?

958
00:50:05,719 --> 00:50:05,839
Speaker 3: Uh?

959
00:50:05,920 --> 00:50:08,879
Speaker 10: They they actually did report this morning and they beat

960
00:50:08,880 --> 00:50:12,160
Speaker 10: by a lot. That's why this sun's up. And you know,

961
00:50:12,360 --> 00:50:16,320
Speaker 10: aerospace is through the roof and people, you know, you're estimate,

962
00:50:16,320 --> 00:50:18,720
Speaker 10: you estimate twenty percent growth, it was up twenty eight percent.

963
00:50:18,800 --> 00:50:22,200
Speaker 10: You know, it's just it's just exploding on both the

964
00:50:22,239 --> 00:50:24,719
Speaker 10: oe east side and also on the commercial after market side.

965
00:50:24,800 --> 00:50:27,240
Speaker 4: Yeah, looking at that stock, I mean, up six percent

966
00:50:27,280 --> 00:50:29,480
Speaker 4: this morning and then you're to date up eighty percent,

967
00:50:29,520 --> 00:50:31,400
Speaker 4: trading around multi year highs.

968
00:50:31,400 --> 00:50:34,120
Speaker 1: You've been waiting a decade a while for that, a

969
00:50:34,160 --> 00:50:34,759
Speaker 1: while for that.

970
00:50:34,920 --> 00:50:37,480
Speaker 10: But the other thing is their other big they've their

971
00:50:37,560 --> 00:50:40,959
Speaker 10: other side. The Vernova piece has really struggled largely because

972
00:50:40,960 --> 00:50:44,640
Speaker 10: of the renewable business, and that came together nicely you

973
00:50:44,680 --> 00:50:48,680
Speaker 10: know today as well, with huge orders, like a tripling

974
00:50:48,719 --> 00:50:52,040
Speaker 10: of orders, and the losses were much less and expected

975
00:50:52,040 --> 00:50:55,600
Speaker 10: because the volumes were up so much. The volumes were

976
00:50:55,640 --> 00:50:57,560
Speaker 10: up twenty seven percent and the street was looking for

977
00:50:57,560 --> 00:51:00,839
Speaker 10: five percent. So that business is the one that's been,

978
00:51:00,880 --> 00:51:03,640
Speaker 10: you know, hanging around their neck that they can they

979
00:51:03,680 --> 00:51:05,480
Speaker 10: fix it. Can it be a good business. I'm not

980
00:51:05,520 --> 00:51:07,040
Speaker 10: sure it can be a good business, but it's a

981
00:51:07,040 --> 00:51:08,279
Speaker 10: lot better business.

982
00:51:07,920 --> 00:51:10,000
Speaker 11: Than than we thought.

983
00:51:10,080 --> 00:51:11,239
Speaker 10: And that's what's really going on.

984
00:51:11,320 --> 00:51:13,680
Speaker 4: So talk to us about this turnaround for Ge after

985
00:51:13,719 --> 00:51:15,920
Speaker 4: it was kicked out of the Dow in twenty eighteen.

986
00:51:16,640 --> 00:51:21,840
Speaker 10: They you know, they they particularly in their power business

987
00:51:22,320 --> 00:51:25,600
Speaker 10: business just fell out of bed and they had way

988
00:51:25,600 --> 00:51:27,920
Speaker 10: too much capacity for the large turbines, you know that

989
00:51:28,000 --> 00:51:30,840
Speaker 10: generate electricity people don't We don't use them anymore. The

990
00:51:30,840 --> 00:51:35,319
Speaker 10: stuff that's there is will still be. The installed base

991
00:51:35,400 --> 00:51:37,440
Speaker 10: is still good, but the growth rate of that market

992
00:51:37,520 --> 00:51:39,600
Speaker 10: and the size of that market has been cut in half.

993
00:51:39,880 --> 00:51:42,040
Speaker 10: Then you've got a win business that they've always lost.

994
00:51:42,040 --> 00:51:44,200
Speaker 10: They've lost money in for a long period of time.

995
00:51:44,560 --> 00:51:44,759
Speaker 3: You know.

996
00:51:44,800 --> 00:51:47,200
Speaker 10: So you had a lot of lingering problems, and the

997
00:51:47,239 --> 00:51:51,239
Speaker 10: fine and the finance UB was a real problem for them,

998
00:51:51,719 --> 00:51:56,160
Speaker 10: and they basically got out of the credit sub and

999
00:51:56,200 --> 00:51:58,239
Speaker 10: there are a lot of rights related to that. So

1000
00:51:58,280 --> 00:51:59,759
Speaker 10: it felt like they couldn't get out of their own

1001
00:51:59,800 --> 00:52:01,240
Speaker 10: way for a couple of years.

1002
00:52:01,280 --> 00:52:04,440
Speaker 1: Actually, there's nobody better to ask this question, which is

1003
00:52:04,840 --> 00:52:07,799
Speaker 1: because you've known this company forever, what do you think

1004
00:52:07,840 --> 00:52:11,120
Speaker 1: today with hindsight, the legacy of Jack Welch.

1005
00:52:11,000 --> 00:52:15,000
Speaker 10: Is I have said, and I've said this a while back,

1006
00:52:15,239 --> 00:52:17,439
Speaker 10: that someday they're gonna you know, they wrote the book

1007
00:52:17,520 --> 00:52:19,879
Speaker 10: The House that Jack Built. Someday they're going to write

1008
00:52:19,880 --> 00:52:22,120
Speaker 10: the book The Straw House that Jack Built. And I

1009
00:52:22,200 --> 00:52:22,880
Speaker 10: hope I do not get in.

1010
00:52:22,920 --> 00:52:26,360
Speaker 1: Trouble for that, because I mean, there was a time

1011
00:52:26,400 --> 00:52:31,480
Speaker 1: when he was building up General Electric, mainly through acquisitions, presumably,

1012
00:52:31,520 --> 00:52:33,719
Speaker 1: you know, kind of that conglomerate model, trying to find

1013
00:52:33,719 --> 00:52:35,840
Speaker 1: businesses with great returns and all that kind of stuff

1014
00:52:35,880 --> 00:52:38,120
Speaker 1: and just building them up and building them up. And

1015
00:52:38,120 --> 00:52:42,360
Speaker 1: then GE owned everything from NBC Universal to turbine engines

1016
00:52:43,080 --> 00:52:46,520
Speaker 1: and light bulbs, light bulbs exactly, I mean, And that

1017
00:52:46,680 --> 00:52:50,880
Speaker 1: was the conglomerates. That was a real business strategy for

1018
00:52:51,000 --> 00:52:55,240
Speaker 1: decades in this country. Jack Walsh arguably the most prominent

1019
00:52:55,920 --> 00:53:00,000
Speaker 1: proponent of that. Now that's I think probably the market

1020
00:53:00,080 --> 00:53:02,320
Speaker 1: has been saying for the last ten fifteen years plus,

1021
00:53:02,880 --> 00:53:03,960
Speaker 1: that's not where we want to be.

1022
00:53:04,040 --> 00:53:06,080
Speaker 10: Well, they grew, he grew the finance up up to

1023
00:53:06,120 --> 00:53:10,040
Speaker 10: be fifty percent of GE's earnings. It was very profitable,

1024
00:53:10,080 --> 00:53:13,080
Speaker 10: and they got involved in a lot of financial things

1025
00:53:13,080 --> 00:53:14,880
Speaker 10: that they probably should not have been involved in.

1026
00:53:15,000 --> 00:53:16,520
Speaker 1: But originally it was set up, Oh, you want to

1027
00:53:17,040 --> 00:53:19,399
Speaker 1: buy a hundred billion dollars, I mean one hundred million

1028
00:53:19,400 --> 00:53:21,799
Speaker 1: dollar piece of equipment for me, I'll help finance it,

1029
00:53:21,840 --> 00:53:23,759
Speaker 1: just like all that. And that's what it's back to.

1030
00:53:24,040 --> 00:53:27,160
Speaker 10: That's what it's very small they financed like the big

1031
00:53:27,320 --> 00:53:29,840
Speaker 10: turbine equipment, et cetera. But they are out of all

1032
00:53:29,920 --> 00:53:32,200
Speaker 10: that other stuff. But they had to take huge write

1033
00:53:32,200 --> 00:53:32,719
Speaker 10: offs to.

1034
00:53:32,640 --> 00:53:34,320
Speaker 1: Get out of that financial crisis.

1035
00:53:34,520 --> 00:53:37,360
Speaker 10: And the other thing is he was, if you know,

1036
00:53:37,960 --> 00:53:42,200
Speaker 10: in my opinion, in order to get higher margins every

1037
00:53:42,239 --> 00:53:45,720
Speaker 10: single quarter, you know, he you know, I think they

1038
00:53:46,160 --> 00:53:47,799
Speaker 10: milked the R and D and they and they had

1039
00:53:47,800 --> 00:53:49,120
Speaker 10: to play catch up on that as well, and I

1040
00:53:49,160 --> 00:53:51,680
Speaker 10: think that was that was another problem.

1041
00:53:52,280 --> 00:53:52,480
Speaker 6: You know.

1042
00:53:52,600 --> 00:53:56,480
Speaker 10: So he really was, you know, the king of industrials

1043
00:53:56,520 --> 00:54:01,120
Speaker 10: for a while, but Emilt was left with a large headache.

1044
00:54:01,480 --> 00:54:04,160
Speaker 4: When you're looking at these earnings results from three M

1045
00:54:04,280 --> 00:54:06,719
Speaker 4: to GE, what do you think these corporate profits in

1046
00:54:06,760 --> 00:54:09,560
Speaker 4: this particular segment of the S and P five hundred

1047
00:54:09,560 --> 00:54:11,160
Speaker 4: tell us about the direction of the economy.

1048
00:54:11,680 --> 00:54:13,960
Speaker 10: You know, I don't think the economy is as bad

1049
00:54:14,000 --> 00:54:17,200
Speaker 10: as as people are anticipating. You know, people are worried

1050
00:54:17,200 --> 00:54:20,800
Speaker 10: about a fallout in the second half. Some markets are slowing,

1051
00:54:20,800 --> 00:54:23,600
Speaker 10: but it's a pretty narrow slow down it's certain consumer

1052
00:54:23,800 --> 00:54:28,360
Speaker 10: markets and more that that actually is probably spreading. But

1053
00:54:28,440 --> 00:54:31,319
Speaker 10: the industrial side is really solid. And if you see

1054
00:54:31,360 --> 00:54:34,120
Speaker 10: all the mega projects from on shoring, you know, the

1055
00:54:34,160 --> 00:54:36,600
Speaker 10: infrastructure a bild the IRA, which is why Wind is

1056
00:54:36,600 --> 00:54:39,960
Speaker 10: doing so well. All this federal money is just going

1057
00:54:40,040 --> 00:54:42,200
Speaker 10: to prop up industrials and I don't really see we're

1058
00:54:42,200 --> 00:54:44,040
Speaker 10: gonna we're gonna see an industrial recession.

1059
00:54:44,280 --> 00:54:46,800
Speaker 1: How about China? And your companies deal with China and

1060
00:54:46,880 --> 00:54:48,720
Speaker 1: like nobody's business, So what are they saying?

1061
00:54:49,000 --> 00:54:52,400
Speaker 10: It's slow? The recovery is slower than expected? Uh uh?

1062
00:54:52,520 --> 00:54:55,319
Speaker 10: Three M actually has a large exposure to China and

1063
00:54:55,320 --> 00:54:57,719
Speaker 10: they said it was they're in recovery now and it

1064
00:54:57,760 --> 00:54:58,560
Speaker 10: was down eight percent?

1065
00:54:58,719 --> 00:55:00,880
Speaker 1: Are they? I mean, what how are they framing the

1066
00:55:00,920 --> 00:55:03,160
Speaker 1: geopolitical risk around the US and China or China in

1067
00:55:03,160 --> 00:55:03,479
Speaker 1: the West?

1068
00:55:03,520 --> 00:55:05,440
Speaker 10: People are you know? I would say that you're not

1069
00:55:05,480 --> 00:55:07,920
Speaker 10: going to see more dollars spent there because there is

1070
00:55:07,960 --> 00:55:10,600
Speaker 10: some concern about that. It's an important market. It's five

1071
00:55:10,760 --> 00:55:13,600
Speaker 10: to eight percent of sales for a lot of these companies.

1072
00:55:14,040 --> 00:55:17,200
Speaker 10: They can't pick up and leave, but they are certainly

1073
00:55:17,400 --> 00:55:20,920
Speaker 10: rethinking at least whether they're how the business is sized

1074
00:55:21,360 --> 00:55:23,600
Speaker 10: because we don't know what's going to happen politically, and

1075
00:55:23,680 --> 00:55:26,960
Speaker 10: the recovery just is really taking a while to get going.

1076
00:55:27,719 --> 00:55:30,279
Speaker 1: So how did they just thirty seconds? What's kind of

1077
00:55:30,280 --> 00:55:32,200
Speaker 1: the top area that you're like, what's the hot.

1078
00:55:32,640 --> 00:55:36,840
Speaker 10: The two hottest areas. Aerospace is just on fire, and

1079
00:55:37,360 --> 00:55:40,800
Speaker 10: that has a lot of legs. Also, anything climate related,

1080
00:55:40,840 --> 00:55:44,120
Speaker 10: like the HVAC business. Residential hvac is down, but the

1081
00:55:44,120 --> 00:55:47,680
Speaker 10: rest of the business is strong. And we've got a

1082
00:55:47,719 --> 00:55:52,200
Speaker 10: trillion dollars in money tax credits. I mean, well, if

1083
00:55:52,200 --> 00:55:54,360
Speaker 10: you it's three hundred million in tax credits and a

1084
00:55:54,360 --> 00:55:57,200
Speaker 10: trillion dollars when you gross it up of money as

1085
00:55:57,239 --> 00:55:58,480
Speaker 10: a result of the IRA.

1086
00:55:58,880 --> 00:56:01,080
Speaker 1: Yep, all right, Karen Great. I've always appreciate getting you,

1087
00:56:01,560 --> 00:56:04,640
Speaker 1: getting your insight, you know her, Karen and her companies

1088
00:56:04,680 --> 00:56:07,520
Speaker 1: touch everything into this economy. It's amazing something looking at.

1089
00:56:07,400 --> 00:56:09,479
Speaker 4: This industrial sector in the s and P five hundred

1090
00:56:09,480 --> 00:56:10,400
Speaker 4: trading around records.

1091
00:56:10,520 --> 00:56:13,560
Speaker 1: Yeah, yep, good. Everybody wants to talk to Kareny Buhart

1092
00:56:13,600 --> 00:56:15,880
Speaker 1: now Coaren hoopmart Senior and also covers some machinery and

1093
00:56:15,880 --> 00:56:19,399
Speaker 1: all that industrial stuff for Bloomberg and Talents. Appreciate getting

1094
00:56:19,400 --> 00:56:20,120
Speaker 1: a few minutes.

1095
00:56:20,040 --> 00:56:23,160
Speaker 5: You're listening to the tape. Cat's are live program Bloomberg

1096
00:56:23,200 --> 00:56:26,799
Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the

1097
00:56:26,880 --> 00:56:30,080
Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.

1098
00:56:30,120 --> 00:56:32,960
Speaker 5: You can also listen live on Amazon Alexa from our

1099
00:56:32,960 --> 00:56:38,000
Speaker 5: flagship New York station, Just say Alexa play Bloomberg eleven thirty.

1100
00:56:38,120 --> 00:56:40,799
Speaker 4: Well, we've talked so much about particular industry groups that

1101
00:56:40,840 --> 00:56:44,960
Speaker 4: have really rebounded as things continue to reopen from the pandemic.

1102
00:56:45,000 --> 00:56:47,040
Speaker 4: And one of those, especially when you're looking at what's

1103
00:56:47,040 --> 00:56:49,839
Speaker 4: happening with some of these gym related stocks, looking at

1104
00:56:49,840 --> 00:56:54,359
Speaker 4: what's happening with Lifetime Group that's ticker symbol LTCH up

1105
00:56:54,480 --> 00:56:58,360
Speaker 4: close to actually more than fifty percent this year alone.

1106
00:56:58,640 --> 00:57:00,720
Speaker 4: And who better to join us for our c suite

1107
00:57:00,719 --> 00:57:05,279
Speaker 4: conversation than Akarate, CEO at Lifetime Fitness, Who's joining us

1108
00:57:05,320 --> 00:57:07,960
Speaker 4: on zoom to discuss this company post the pandemic as

1109
00:57:07,960 --> 00:57:10,160
Speaker 4: well as earnings and the outlook when it comes to

1110
00:57:10,239 --> 00:57:13,520
Speaker 4: consumers as well as gym goers. And you've talked a

1111
00:57:13,600 --> 00:57:17,080
Speaker 4: lot Bachram about how when it comes to Lifetime Fitness,

1112
00:57:17,080 --> 00:57:18,920
Speaker 4: this isn't just a gym. It's supposed to be this

1113
00:57:19,000 --> 00:57:22,240
Speaker 4: sort of country club experience. Talk to us about what's

1114
00:57:22,280 --> 00:57:25,760
Speaker 4: been the key deer success, especially when it comes to

1115
00:57:25,800 --> 00:57:27,760
Speaker 4: the reopening that you've had over the past year.

1116
00:57:28,720 --> 00:57:31,800
Speaker 11: Fantastic. What we focused on from the time we reopened

1117
00:57:32,240 --> 00:57:35,520
Speaker 11: it was desirability for our customer. We worked on programming.

1118
00:57:35,960 --> 00:57:42,240
Speaker 11: We worked on much more elevated experiences across all aspects

1119
00:57:42,280 --> 00:57:45,240
Speaker 11: of what we offer, whether it's the beach clubs, our food,

1120
00:57:45,360 --> 00:57:49,720
Speaker 11: our spas, our personal training, small group training, our rough program,

1121
00:57:49,760 --> 00:57:53,200
Speaker 11: all of the different program We added pickleball at the

1122
00:57:53,880 --> 00:57:57,360
Speaker 11: sort of an incredible pace. We're almost six hundred courts today.

1123
00:57:57,800 --> 00:57:59,960
Speaker 11: We will have at least seven hundred by the year

1124
00:58:00,040 --> 00:58:02,200
Speaker 11: year in one thousand by the end of next year.

1125
00:58:02,520 --> 00:58:05,440
Speaker 11: So we basically have listened to see what the customer

1126
00:58:05,520 --> 00:58:10,360
Speaker 11: wants and offer that at the most experiential level. Everything's

1127
00:58:10,400 --> 00:58:16,120
Speaker 11: working beautifully. We are completely happy with our results, right

1128
00:58:16,160 --> 00:58:19,440
Speaker 11: where we expect to be. We are doing this without

1129
00:58:19,480 --> 00:58:24,440
Speaker 11: any promotions, any sales, any salespeople. We're just focused on

1130
00:58:24,520 --> 00:58:28,640
Speaker 11: creating that desirability and the customer is pouring in. Our

1131
00:58:28,680 --> 00:58:31,280
Speaker 11: results have been never better. We have the best margins.

1132
00:58:31,320 --> 00:58:36,320
Speaker 11: We rewired the company structurally the last year to make

1133
00:58:36,360 --> 00:58:40,360
Speaker 11: sure the decisions are made much more rapidly to satisfy

1134
00:58:40,400 --> 00:58:44,520
Speaker 11: the customer, and that has also generated massive improvement to

1135
00:58:44,560 --> 00:58:47,400
Speaker 11: our margins. So it's all good news, Barram.

1136
00:58:47,400 --> 00:58:50,640
Speaker 1: Your stock is down fifteen percent today on your earnings.

1137
00:58:50,640 --> 00:58:55,920
Speaker 1: Your sales missed, disappoints. Talk to us about what happened

1138
00:58:55,960 --> 00:58:58,400
Speaker 1: with the latest quarter and kind of what your guidance

1139
00:58:58,480 --> 00:58:58,800
Speaker 1: is here.

1140
00:58:59,480 --> 00:59:06,000
Speaker 11: That's honestly enigma. We didn't miss anything. The analysts have

1141
00:59:06,120 --> 00:59:11,120
Speaker 11: missed completely. They have tried to listen to our sort

1142
00:59:11,160 --> 00:59:13,840
Speaker 11: of tone about Ebada and they try to get to

1143
00:59:13,880 --> 00:59:18,760
Speaker 11: that Ebida by lower margins and just pushing the revenue

1144
00:59:18,840 --> 00:59:22,600
Speaker 11: numbers up. Our revenue is exactly where expected to be.

1145
00:59:22,680 --> 00:59:25,600
Speaker 11: It's within the range we gave the street. So I

1146
00:59:25,760 --> 00:59:29,760
Speaker 11: have no apologies for anyone. Our team is working their

1147
00:59:29,800 --> 00:59:34,520
Speaker 11: cans off. Everybody is performing. We're super happy with the

1148
00:59:34,560 --> 00:59:36,760
Speaker 11: momentum of the business and where we can take it

1149
00:59:36,760 --> 00:59:37,200
Speaker 11: from here.

1150
00:59:37,360 --> 00:59:38,960
Speaker 1: Well, it sounds like at the very least you needs

1151
00:59:39,000 --> 00:59:41,760
Speaker 1: somebody to manage streets expectations so you don't have that

1152
00:59:41,840 --> 00:59:44,200
Speaker 1: volatility in the stock. That would just be an aside

1153
00:59:44,200 --> 00:59:46,800
Speaker 1: from a former analyst. Talk to us about what are

1154
00:59:46,840 --> 00:59:50,440
Speaker 1: your growth drivers going forward here as you adjust kind

1155
00:59:50,440 --> 00:59:53,440
Speaker 1: of a new world where you know, people are getting

1156
00:59:53,440 --> 00:59:54,040
Speaker 1: back out again.

1157
00:59:54,680 --> 00:59:57,160
Speaker 11: Yeah, you know. Actually the you know, the clubs are

1158
00:59:57,160 --> 01:00:00,160
Speaker 11: doing fantastic. Many clubs are at the point where we

1159
01:00:00,320 --> 01:00:03,800
Speaker 11: really are putting them on waitlist and then we just

1160
01:00:03,920 --> 01:00:07,000
Speaker 11: basically meeter the people in so that we can manage

1161
01:00:07,000 --> 01:00:12,160
Speaker 11: that experience. We have ability to basically create the rack

1162
01:00:12,280 --> 01:00:16,480
Speaker 11: rate where that we can create optimal experiential for the people.

1163
01:00:17,160 --> 01:00:21,960
Speaker 11: We continue to create invent programming. The most recent one

1164
01:00:22,000 --> 01:00:26,160
Speaker 11: that we are in the guts of getting it rolled

1165
01:00:26,160 --> 01:00:30,640
Speaker 11: out by beginning of first fourth quarter this dynamic stretch.

1166
01:00:30,680 --> 01:00:32,880
Speaker 11: We'll have that rolled out to one hundred and fifty

1167
01:00:33,240 --> 01:00:38,800
Speaker 11: locations by October one. So we continually think, invent, reinvent

1168
01:00:39,240 --> 01:00:43,120
Speaker 11: opportunities to serve the customer in all aspects of their

1169
01:00:43,160 --> 01:00:46,920
Speaker 11: healthy living and healthy aging. And so we have many,

1170
01:00:46,960 --> 01:00:50,920
Speaker 11: many other initiatives in the works. So I anticipate double

1171
01:00:50,960 --> 01:00:54,440
Speaker 11: digit growth for this company top one, bottom line for

1172
01:00:54,520 --> 01:00:55,640
Speaker 11: the foreseeable future.

1173
01:00:55,960 --> 01:00:58,960
Speaker 4: Let's talk about the demographics, because the average membership is

1174
01:00:59,000 --> 01:01:02,000
Speaker 4: over two hundred dollars in some key areas per month,

1175
01:01:02,080 --> 01:01:04,919
Speaker 4: and more than forty percent of the members are under

1176
01:01:05,040 --> 01:01:07,520
Speaker 4: thirty five years old. So I'm curious when it comes

1177
01:01:07,520 --> 01:01:11,680
Speaker 4: to student loan repayments, how that could potentially impact your business.

1178
01:01:11,960 --> 01:01:15,400
Speaker 11: Yeah, you know what, Honestly, I don't see that being

1179
01:01:15,440 --> 01:01:22,200
Speaker 11: a factor whatsoever. Our memberships are very broad, from very

1180
01:01:22,320 --> 01:01:25,480
Speaker 11: very young people to very very old people. We have

1181
01:01:25,640 --> 01:01:28,000
Speaker 11: kids from ninety days old in these clubs with their

1182
01:01:28,000 --> 01:01:30,680
Speaker 11: families all the way to eighty ninety year old members.

1183
01:01:30,880 --> 01:01:34,760
Speaker 11: So no one segment is going to have an impact

1184
01:01:35,120 --> 01:01:38,040
Speaker 11: in our business in a way that people think, oh

1185
01:01:38,080 --> 01:01:39,520
Speaker 11: my god, you know, the student loan is going to

1186
01:01:39,560 --> 01:01:42,960
Speaker 11: make We're not seeing anything. In fact, the number one

1187
01:01:43,080 --> 01:01:48,200
Speaker 11: indication to the health of our membership is attrition race, which,

1188
01:01:48,360 --> 01:01:52,080
Speaker 11: as I mentioned earlier, June was the first month we

1189
01:01:52,240 --> 01:01:57,280
Speaker 11: saw after COVID reopening that we had attrition rates below

1190
01:01:57,320 --> 01:02:01,080
Speaker 11: twenty nineteen rates. Now that has fallen through with July

1191
01:02:01,280 --> 01:02:04,200
Speaker 11: and August having exactly the same friends, and we take

1192
01:02:04,240 --> 01:02:08,360
Speaker 11: attritions today for September, so we already know the numbers

1193
01:02:08,360 --> 01:02:12,920
Speaker 11: for July and August attritions. So it's all showing complete

1194
01:02:13,000 --> 01:02:16,840
Speaker 11: signs of strength. We're not seeing any weakness in our

1195
01:02:16,960 --> 01:02:21,040
Speaker 11: clubs or our performance. So and again the students and

1196
01:02:21,240 --> 01:02:24,120
Speaker 11: those who can be impacted by this is going to

1197
01:02:24,120 --> 01:02:28,080
Speaker 11: be a small section. Lifetime is so broad in terms

1198
01:02:28,080 --> 01:02:31,640
Speaker 11: of our offering, in terms of our demographic that I

1199
01:02:31,680 --> 01:02:34,280
Speaker 11: don't think any one sector is going to make a difference,

1200
01:02:34,480 --> 01:02:37,440
Speaker 11: and we're us not being able to deliver the numbers

1201
01:02:37,440 --> 01:02:38,360
Speaker 11: we guide the street.

1202
01:02:38,600 --> 01:02:40,720
Speaker 1: All right, Barron, thanks so much for joining us. Botrom

1203
01:02:41,080 --> 01:02:44,960
Speaker 1: ak Rodi, CEO of Lifetime Group Holdings. That is a

1204
01:02:44,960 --> 01:02:46,920
Speaker 1: New York stock A change list is stocking on public

1205
01:02:48,000 --> 01:02:50,840
Speaker 1: last year. I'm sorry twenty twenty one at eighteen dollars

1206
01:02:50,840 --> 01:02:54,120
Speaker 1: to share the symbols lth that's a ticker fload into

1207
01:02:54,160 --> 01:02:56,280
Speaker 1: your Bloomberg terminal.

1208
01:02:58,480 --> 01:03:01,400
Speaker 2: Thanks for listening to the Bloomberg Mark Kids podcast. You

1209
01:03:01,440 --> 01:03:04,760
Speaker 2: can subscribe and listen to interviews at Apple Podcasts or

1210
01:03:05,000 --> 01:03:08,720
Speaker 2: whatever podcast platform you prefer. I'm Matt Miller. I'm on

1211
01:03:08,800 --> 01:03:11,320
Speaker 2: Twitter at Matt Miller nineteen seventy three.

1212
01:03:11,760 --> 01:03:14,240
Speaker 1: And I'm Paul Sweeney. I'm on Twitter at pt Sweeney.

1213
01:03:14,280 --> 01:03:16,920
Speaker 1: Before the podcast, you can always catch us worldwide at

1214
01:03:16,960 --> 01:03:19,560
Speaker 1: Bloomberg Radio