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US Bank Earnings, Tesla Hiring · Bloomberg Intelligence

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Speaker 2: dot com search Bloomberg Podcast. A lot of stuff coming out,
0:37
Speaker 2: a lot of earnings coming out. We had Eco data today,
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Speaker 2: retail sales solid, and on the earnings front, we had
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Speaker 2: some of the big investment banks report here, Morgan Stanley
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Speaker 2: and Bank of America's Charlie was just reporting stocks at
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Speaker 2: fifty two week highs, both of them here today. So
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Speaker 2: Allison Williams is going to break it down for She's
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Speaker 2: a senior anild. She covers all these big banks for
0:55
Speaker 2: Bloomberg Intelligence. She joins us here in our studio. Alison,
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Speaker 2: let's start with your former firm, Morgan Stanley. Stocks up
1:03
Speaker 2: two and a half percent today, fifty two week high.
1:05
Speaker 2: What did the street like here.
1:07
Speaker 3: I mean really strong institutional numbers. I mean it was
1:11
Speaker 3: a great quarter for trading and investment banking, So equities
1:15
Speaker 3: trading really I think a source of strength. Morgan Stanley
1:18
Speaker 3: doing better than expected across the board and just really well.
1:23
Speaker 3: So equities trading I think was the standout. Fixed income,
1:27
Speaker 3: you know, was sort of mixed, but really compared to
1:31
Speaker 3: a year ago. I think that's strong that those revenues
1:35
Speaker 3: are turning out to be resilient. And on the investment
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Speaker 3: banking side, investors are excited that there could be momentum
1:41
Speaker 3: coming into the into the next quarter. You know, M
1:43
Speaker 3: and A still just historically low, so improving from a
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Speaker 3: low base. Same thing with equities, but I think reasons
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Speaker 3: for optimism, especially with the stocks in general doing so well.
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Speaker 2: Now for Bank of America, when I think a Bank
1:57
Speaker 2: of America, I think it a corporate bank, you know,
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Speaker 2: making big loans to big corporate customers around the world.
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Speaker 3: What did you see there, so, you know, I think
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Speaker 3: the demand is for loans is still something that we're
2:09
Speaker 3: looking more for the second half. If we do get
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Speaker 3: the FED rate cuts, that is definitely going to be
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Speaker 3: a help. And I think for Bank of America what
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Speaker 3: people are excited about is that it could be the trough.
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Speaker 3: So Bank of America saying that it's going to be
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Speaker 3: the trough, this will be the weakest quarter. But keep
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Speaker 3: in mind that they are baking in the FED rate
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Speaker 3: cut expectations and some loan growth in the second half.
2:31
Speaker 3: So we'll see if they can deliver that. But definitely
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Speaker 3: telling investors what they want to hear today in terms
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Speaker 3: of the fourth quarter, a little bit higher entry rate,
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Speaker 3: firming that up, and again that the you know, most
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Speaker 3: of the weakness could be behind us.
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Speaker 4: So does that mean that if we don't get FED
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Speaker 4: cuts that were in that Bank of America is going
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Speaker 4: to have some problems here.
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Speaker 3: I think where the disappointment will come will be loan
2:55
Speaker 3: growth spurred by FED cuts. Right, So I think that
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Speaker 3: some of the loan growth that they're factoring in is
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Speaker 3: based on that we heard from Wells Fargo where they're
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Speaker 3: you know, still a lot more cautious on the loan
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Speaker 3: growth side. And commercial and industrial has been a weak spot.
3:12
Speaker 3: Credit card is has been a strong spot.
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Speaker 5: You know.
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Speaker 2: When I was in banking, one of our most lucrative
3:17
Speaker 2: businesses that the Chase Man had bank was this leverage lending,
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Speaker 2: you know, lending to companies that don't have assets or
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Speaker 2: inventory and any kind of just lending into cash flow.
3:25
Speaker 2: It's a little bit more risky. It's tough to show
3:27
Speaker 2: your credit officer where the collateral is for this loan.
3:30
Speaker 2: But we made a lot of money doing it's a
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Speaker 2: private credit market. How's a private credit market been poaching
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Speaker 2: on that business?
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Speaker 3: So actually you would have been making this would have
3:40
Speaker 3: been a good quarter for you. I know you'd be happy.
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Speaker 3: The first quarter was good, second quarter was good. And
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Speaker 3: I think that if you look at some of the
3:48
Speaker 3: most recent statistics that we've seen, is that banks are
3:52
Speaker 3: still doing a lot of that refinancing. Right, So a
3:54
Speaker 3: lot of the business that's been happening in the debt markets,
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Speaker 3: debt fees, a source of strength across the banks supporter
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Speaker 3: has been refinancing, and that leverage lending business has been
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Speaker 3: doing well at the bank. So even though private credit
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Speaker 3: is certainly raising a lot of funds and a product
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Speaker 3: in demand, banks are still getting their share of refinancing
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Speaker 3: in their leverage one volumes. And that's you know sort
4:21
Speaker 3: of you saw like the huge growth at City Group
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Speaker 3: and the numbers at Gold and sachs where they have
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Speaker 3: relative strength in those businesses. High yields another area that's
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Speaker 3: doing really well.
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Speaker 4: Back to the consumer, so we'll have Paul do them
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Speaker 4: and banking stuff, all the consumer stuff. What about chargeobs
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Speaker 4: on their credit card losses for Bank of America? Was
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Speaker 4: that higher lower? Where did that come out in general?
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Speaker 3: I would say there, So their provisions overall came in
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Speaker 3: in line. We did see, you know, charge offs in
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Speaker 3: the car business, charge offs and commercial real estate. So
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Speaker 3: those are areas that we're watching, but you know, controlled
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Speaker 3: and in line with expectations. I think the area of
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Speaker 3: weakness that we saw in card this quarter was at
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Speaker 3: City Group. They have a private label business that's it
5:05
Speaker 3: tends to skew on the lower income side of things.
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Speaker 3: You're seeing losses come in above their targeted range. There
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Speaker 3: is a seasonal pattern to that, and so there are
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Speaker 3: expectations that that could come in, but I would say
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Speaker 3: the second quarter did not give us confidence in those expectations.
5:24
Speaker 3: So I think that is continues to be an area
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Speaker 3: for watching. It's not necessarily a big area for the
5:29
Speaker 3: big banks that we're talking about today and the ones
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Speaker 3: that I cover, but I think it's important to watch,
5:35
Speaker 3: you know, for the overall economy and to some of
5:38
Speaker 3: the other card names such as Synchrony.
5:42
Speaker 2: CEO at Morgan Stanley, we have a new CEO, Ted Pick,
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Speaker 2: I guess with a little bit of hindsight here does
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Speaker 2: it seem like it's kind of working and everybody's kind
5:51
Speaker 2: of found their place, and.
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Speaker 3: So it seems like, you know, he's talking with conviction.
5:56
Speaker 3: I think the boldest statement he made today was with
5:59
Speaker 3: regard to the margins and the wealth business. So the
6:02
Speaker 3: wealth business, as you know under the former CEO and
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Speaker 3: a lot of acquisitions, wealth and asset management is the
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Speaker 3: predominant revenue and profit engine. It's what investors are watching.
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Speaker 3: The wealth margin was something where Pick early in the
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Speaker 3: year took off some of the upside under the prior targets,
6:22
Speaker 3: and that thirty percent wealth target, I think is a
6:24
Speaker 3: question among investors if they can get there. And Ted
6:27
Speaker 3: really trying to instill confidence that he is a believer
6:31
Speaker 3: the wealth flows at Morganstone I would say, you know,
6:34
Speaker 3: that is the probably the number one thing I think
6:37
Speaker 3: that that we watch for them, and that did come
6:40
Speaker 3: in week this quarter. The fee based part of those
6:43
Speaker 3: flows were relatively resilient, so some puts in takes there,
6:48
Speaker 3: but I think the wealth flows do bear watching, and
6:51
Speaker 3: that that really has been the engine of optimism investors,
6:54
Speaker 3: like you know, the tilt towards the recurring fee based business,
6:58
Speaker 3: and so I think that the have to continue to
7:01
Speaker 3: deliver and deliver on that thirty percent margin that Pick
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Speaker 3: is confident, and.
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Speaker 4: Then I'll go to sort of what the macro read
7:09
Speaker 4: is from Morgan Stanley because also on the call, Ted
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Speaker 4: Pick said that you're going to see normal M and
7:14
Speaker 4: A return unless there's a full bown recession, and he
7:16
Speaker 4: thinks we're in the early stages of multi year investment
7:18
Speaker 4: banking leed cycle.
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Speaker 3: Oh yeah, oh yeah, but we've been hearing that for
7:22
Speaker 3: so many quarters now and you're starting to definitely, you know,
7:26
Speaker 3: feel more of the doubt coming from analysts. Right. So
7:30
Speaker 3: the twenty twenty one, amazing twenty twenty two disaster, the
7:35
Speaker 3: lift that we got last year did not materialize. I
7:38
Speaker 3: would say that so far this year EM and A
7:41
Speaker 3: has been disappointing again, and you know you can see
7:45
Speaker 3: in terms of the reported fees and the announcements, right,
7:47
Speaker 3: so both of those have been disappointing. It does tend
7:51
Speaker 3: to pick up late in the year. It does tend
7:55
Speaker 3: to pick up after elections, so I think it'll be
7:58
Speaker 3: hard to get for that particular business line, you know,
8:03
Speaker 3: sort of the momentum people are looking for perhaps until
8:06
Speaker 3: after the election. But on the underwriting side, I think
8:10
Speaker 3: is where you're seeing, you know, perhaps more of the
8:13
Speaker 3: momentum and strength. Goldvinzachs, though who is tends to be
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Speaker 3: the biggest and reported revenue, did say significant uptick in
8:20
Speaker 3: their pipeline, debt, underwriting and advisory where the areas of strength.
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Speaker 6: Right.
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Speaker 2: Very good, Allison Williams, Thank you so much. We appreciate that.
8:27
Speaker 2: Alsa Williams covers all the big banks for Bloomberg Intelligence.
8:31
Speaker 2: Joining us here in our New York studio.
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Speaker 4: companies and one hundred and thirty industries worldwide, and occasionally
9:04
Speaker 4: we go across the pond and check him with Craig Trudell.
9:07
Speaker 4: He's Bloomberg Global Autos Editor and he joins us. Now,
9:10
Speaker 4: so many fun things to talk about, but let's just
9:13
Speaker 4: start with Tesla for a second, because the news was
9:14
Speaker 4: quite staggering. They're going to hire nearly eight hundred new
9:17
Speaker 4: employees but didn't. Also they just fire a lot of employees.
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Speaker 6: Yeah, this is very Elon Muskian of Tesla in that
9:28
Speaker 6: it sort of you know, depends on the day of
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Speaker 6: what's going on at this company. So yes, a few
9:34
Speaker 6: months back on the heels of Tesla selling about twenty
9:39
Speaker 6: percent fewer cars than it did in the fourth quarter,
9:43
Speaker 6: Elon Musk wasn't particularly happy with that. With that quarterly showing,
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Speaker 6: he wanted the company to cut headcount by a commensurate amount,
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Speaker 6: so roughly twenty percent. So you know, for contexts, you know,
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Speaker 6: this is a company that you know, had quite a
10:00
Speaker 6: few employees at that time. They started the year with
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Speaker 6: around one hundred and forty thousand, so that would mean
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Speaker 6: twenty eight thousand people being let go. It's unclear whether
10:10
Speaker 6: they got to that, but it is absolutely clear that,
10:13
Speaker 6: you know, certain parts of the company were decimated, I
10:16
Speaker 6: think most notably the super Charging team that really turned
10:19
Speaker 6: a lot of heads because it was a you know,
10:21
Speaker 6: aspect of this company that has been looked at as
10:24
Speaker 6: you know, such a sort of feather in their cap
10:27
Speaker 6: that they really you know, invested where others didn't and
10:32
Speaker 6: built a charging network that worked whereas others have not
10:35
Speaker 6: worked very well, particularly in the US, and so it
10:39
Speaker 6: is kind of shocking to see you know, such a
10:42
Speaker 6: significant you know pulling of people followed by a you
10:47
Speaker 6: know hiring spree of sorts.
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Speaker 3: So do we know kind of what type of roles
10:52
Speaker 3: they're hiring for. Are they hiring.
10:53
Speaker 2: People to bend metal or are they looking to like
10:57
Speaker 2: some software guys for AI and all that, the.
10:59
Speaker 7: Robotax for the superpower people, the superhero Yeah, I think,
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Speaker 7: you know, we we did report even weeks back that
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Speaker 7: some of the Supercharger people, who are you know, a
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Speaker 7: part of the team that was really uh you know
11:12
Speaker 7: cut to a very significant degree, were brought back.
11:15
Speaker 6: Relatively quickly, notably the woman who was running that group,
11:20
Speaker 6: uh you know, was has not been brought back. Uh,
11:23
Speaker 6: and there were some reports that maybe she you know,
11:25
Speaker 6: kind of tried to protect her team and what was
11:29
Speaker 6: you know, dismissed as a result of that. So, uh,
11:33
Speaker 6: you know, in terms of what parts of the company
11:35
Speaker 6: are hiring, it's it's it's pretty broad, but I would say,
11:38
Speaker 6: you know, the data that our very own Kara Carlson
11:42
Speaker 6: has has crunched. Service is a big aspect, which is
11:46
Speaker 6: maybe no surprise in that, you know, the summer season
11:50
Speaker 6: is a busy one for Tesla. People are out, you know,
11:54
Speaker 6: driving for vacations. It's warm outs, they're running their air conditioners,
11:57
Speaker 6: you know, to the extent that you do need the
11:59
Speaker 6: service and electric vehicle, that's one of the things that
12:02
Speaker 6: is common. So, you know, one of the interesting aspects
12:05
Speaker 6: of this story is that you know, we we did
12:07
Speaker 6: speak with with people who were a part of this
12:11
Speaker 6: job job cutting who you know, said that they were
12:14
Speaker 6: surprised that some of the service and salespeople, you know,
12:18
Speaker 6: that that the company you know, clearly needs at a
12:21
Speaker 6: time of you know, busy service work and you know,
12:26
Speaker 6: a company that's struggling to to sell more cars. Uh,
12:29
Speaker 6: you know, we're seeing you know, some people being brought
12:32
Speaker 6: back there, but it is very widespread, I think notably
12:35
Speaker 6: as well. Uh, you know, AI and robotics is definitely
12:39
Speaker 6: you know, an area where everybody is you know, looking
12:41
Speaker 6: at very closely because of you know what this sort
12:44
Speaker 6: of new priority is or or emphasis is on the
12:48
Speaker 6: part of Musk.
12:49
Speaker 5: You know.
12:50
Speaker 2: Craig Bloomberg is also out with a story David Welch
12:53
Speaker 2: that GM's Mary Barris says the automaker won't sell a
12:56
Speaker 2: million evs next year, So just another story, another data
13:00
Speaker 2: point about kind of maybe where the ultimate demand or
13:03
Speaker 2: lack of demand may be for EV's. What's the latest
13:06
Speaker 2: feeling within the industry about how this thing's going to
13:09
Speaker 2: evolve at what pace.
13:11
Speaker 6: Yeah, we've we've seen a really dramatic pullback on the
13:14
Speaker 6: part of GM and Ford in particular. I feel like,
13:16
Speaker 6: you know, Stillantis, you know, formerly FIA Chrysler. They were
13:21
Speaker 6: sort of slow in the first place, you know, making
13:24
Speaker 6: this transition and have you know, not necessarily had much
13:29
Speaker 6: to pull back from. But I would not be surprised
13:32
Speaker 6: if they sort of you know, joined the quote unquote
13:34
Speaker 6: party in terms of you know, maybe dialing back sort
13:39
Speaker 6: of the ramp at which they you know, try to
13:43
Speaker 6: you know, produce more electric vehicles and sell them. But
13:47
Speaker 6: but it is very interesting to see you know, GM
13:50
Speaker 6: and Ford you know, really be sort of welcomed with
13:53
Speaker 6: open arms by the White House, you know, Mary Bara
13:56
Speaker 6: being lauded by Bidens as leading the EV trans that
14:00
Speaker 6: really you know, ticked off Elon Musk and helps explain why,
14:04
Speaker 6: you know, in the last few days we've learned that
14:06
Speaker 6: he's been you know, planning to spend quite a bit
14:09
Speaker 6: of money on you know, contributing to to packs to
14:12
Speaker 6: get to Donald Trump reelected.
14:15
Speaker 4: Well that was my thing is that the Musk Trump
14:17
Speaker 4: love affair I find to be quite interesting because if
14:21
Speaker 4: we can just game out that the love affair is
14:24
Speaker 4: also so President Trump would be more nice to evs,
14:30
Speaker 4: is the huge change that we're expecting with alternative energy
14:34
Speaker 4: and the IRA and a Trump administration maybe not going
14:36
Speaker 4: to happen. I mean, just looked at solar stocks yesterday.
14:38
Speaker 4: They got smoked because of it, but Tesla didn't.
14:42
Speaker 6: Yeah, it is surprising. I mean maybe if you're trading Tesla,
14:46
Speaker 6: you sort of reckon that, you know, the CEO very
14:51
Speaker 6: very publicly endearing himself to the candidate will sort of,
14:55
Speaker 6: you know, come back to benefit him down the line,
14:58
Speaker 6: and maybe some of these threats to do away with
15:00
Speaker 6: electric vehicle tax credits and so forth will fall by
15:04
Speaker 6: the wayside.
15:05
Speaker 1: Uh.
15:05
Speaker 6: You know. Elon even went so far, you know, in
15:09
Speaker 6: the last day or so to to sort of claim
15:12
Speaker 6: that that, you know, doing away with subsidies would only
15:15
Speaker 6: help Tesla. I don't know how exactly he squares that circle,
15:19
Speaker 6: but perhaps it's a matter of Tesla is you know,
15:23
Speaker 6: the strongest of the companies that's trying to make this
15:27
Speaker 6: work and is for this along, and so taking subsidies
15:31
Speaker 6: away would would hurt you know, competitors even more so
15:34
Speaker 6: than it would Tesla. But it certainly wouldn't be good
15:37
Speaker 6: for for Tesla to lose access to seventy five hundred
15:41
Speaker 6: dollars for a lot of its its customers in the
15:43
Speaker 6: US or would be customers. And so, you know, I
15:47
Speaker 6: do think it's very interesting and we've we've heard very
15:50
Speaker 6: similar sort of intev rhetoric on the on the part
15:53
Speaker 6: of jd Vance, his running mate, and so I think
15:57
Speaker 6: it's it's not only Trump who's you know, sort of
16:00
Speaker 6: campaigned against evs, but but his running made as a yesterday.
16:05
Speaker 2: Hey Craig, thanks so much for joining us. Always appreciate
16:07
Speaker 2: talking to you. Craig Trudell, He's Global autos editor for
16:09
Speaker 2: Bloomberg News, joining us via zoom from our London Queen
16:12
Speaker 2: Victoria Street headquarters. How about this, Since April twenty second,
16:15
Speaker 2: Tesla stock is up seventy eight percent. Such a move
16:19
Speaker 2: had there's such a negative sentiment there for you know,
16:21
Speaker 2: four or five quarters here again as the market's trying
16:23
Speaker 2: to discount what is the demand I really like for
16:27
Speaker 2: evs and going forward, and I think definitely a turn
16:30
Speaker 2: around here, So take note of that. Now a big
16:32
Speaker 2: marketing cap stock as well.
16:35
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16:50
Speaker 4: Okay, So the Eco news of the morning was that
16:52
Speaker 4: retail sales number coming and better than estimated. So retail
16:56
Speaker 4: sales off you back out auto and gas. It was
16:57
Speaker 4: about eight tens of one percent in June. That retail
17:00
Speaker 4: sales Control group was up nine tenths of one percent. Sure,
17:04
Speaker 4: they're like doing it in areas where prices have come down,
17:08
Speaker 4: so there's still some price sensitivity to it, but it
17:09
Speaker 4: was pretty strong, So we want to get more on
17:11
Speaker 4: that with Jill Blindshard, president of Enterprise Client Solutions of
17:15
Speaker 4: Advantage Solutions. She joins us now from Chicago, Illinois. What
17:19
Speaker 4: did you make on the numbers, Jill, Yeah.
17:22
Speaker 8: It's so first of all high and thanks for having
17:25
Speaker 8: me back. Boy.
17:26
Speaker 9: I am trying to temper predictions, let's say, because consumer
17:31
Speaker 9: demand is still a really big concern in the back
17:33
Speaker 9: half of this year. A year ago, eighteen percent of
17:36
Speaker 9: CFOs said that they were concerned about the effect of
17:38
Speaker 9: consumer demand on their business.
17:40
Speaker 8: That is now tripled to fifty.
17:41
Speaker 9: Four percent, and so prices are up twenty to forty
17:45
Speaker 9: percent plus choose your category. In most cases, the wages
17:49
Speaker 9: haven't kept that same pace, and so there is a
17:51
Speaker 9: big impact on many households across the country. Consumers have
17:55
Speaker 9: been notoriously price sensitive even before the pandemic, and that
17:58
Speaker 9: waned a bit with cod when they couldn't spend on
18:01
Speaker 9: services and they diverted that to goods.
18:03
Speaker 8: But now they're both back, and they're back at higher prices.
18:05
Speaker 9: And so consumers have to find less expensive alternatives to
18:09
Speaker 9: achieve those same outcomes. They're still traveling, they're still eating out,
18:13
Speaker 9: but the overall transactional value for those is down. And
18:17
Speaker 9: so I'd say I'm trying to temper my predictions for
18:20
Speaker 9: the next six months.
18:21
Speaker 2: What is upflation?
18:24
Speaker 8: I love that, right, so super you know.
18:27
Speaker 9: So first of all, I have fallen prey to this,
18:29
Speaker 9: and so I'll give you my confession here. Inflation is
18:32
Speaker 9: this concept of finding new uses for existing products. So
18:36
Speaker 9: think of things like an all over bodied deodorant, cereal
18:39
Speaker 9: as an economic option for dinner, frozen vegetables a liua
18:42
Speaker 9: fresh vegetables to save on waste.
18:44
Speaker 8: How about this ready pickle cupcakes. That's a thing. And
18:48
Speaker 8: it's not just the cake, it's the frosting. I've fallen
18:50
Speaker 8: prey to dog wipes.
18:52
Speaker 9: I don't know how they're different than a regular wipe,
18:54
Speaker 9: but I feel better about putting that on her paws.
18:57
Speaker 9: Hair sunscreen and TikTokers explain, this is expensive. It's hair sunscreen,
19:06
Speaker 9: so you spray it on your on your hair, so
19:08
Speaker 9: it doesn't so so the sun doesn't do change it.
19:12
Speaker 9: And uh TikTok is riding the social wave. Check out
19:15
Speaker 9: the hashtag late night stack. They are virtually creating a
19:19
Speaker 9: fourth meal, and manufacturers are eager to ride the that wave.
19:23
Speaker 9: So there's a lot of examples of inflation out there
19:26
Speaker 9: as manufacturers get really creative and trying to get their
19:30
Speaker 9: products into more places.
19:32
Speaker 4: I'm I just I don't understand, Like, isn't the point
19:36
Speaker 4: like you want the bleachy sun blonde look like people
19:39
Speaker 4: pay for that. I don't know what I'm not This
19:42
Speaker 4: is gonna get off topic, but I'm gonna do some
19:43
Speaker 4: homework on this. I'm gonna do some research. I'm gonna
19:45
Speaker 4: talk about my feelings. Okay, So what about these unusual strategies,
19:49
Speaker 4: Like are people willing to actually, you know, pay for that?
19:52
Speaker 4: How does a traditional retailer just say, guys come to
19:55
Speaker 4: my store and buy stuff like basic stuff?
19:59
Speaker 6: You know.
19:59
Speaker 8: So the word of month I think is creative.
20:01
Speaker 9: And so we just heard about a very creative strategy
20:04
Speaker 9: from manufacturers and retailers as well as consumers are also
20:07
Speaker 9: getting very creative. So retailers are doing the things that
20:11
Speaker 9: we've seen before. They're pricing their promotion strategies. You know.
20:15
Speaker 9: We'll talk today about some of the significant promotion things
20:18
Speaker 9: happening this summer. But let's talk about the unlikely business
20:22
Speaker 9: pairings and collaborations that we're seeing across retailers today to
20:25
Speaker 9: find new business synergies and drive traffics. So, for example,
20:29
Speaker 9: look at Uber joining forces with Instacart and Costco. Coles
20:32
Speaker 9: is going to put the babies r us stores and
20:34
Speaker 9: some of their stores, much like that they did with Sephora.
20:36
Speaker 9: McDonald's has a partnership with Krispy Kreme. And these things
20:39
Speaker 9: have dual benefit. So first there is these say things
20:42
Speaker 9: on labor and real estate of operating multiple stores as
20:46
Speaker 9: one store. And then there's that unique in store experience
20:49
Speaker 9: that the younger generations really like and they're great traffic drivers.
20:53
Speaker 9: I know that when I take an Amazon package back
20:56
Speaker 9: to Coles, I have to pass five departments each way
20:59
Speaker 9: to take that package back. So really creative solutions by
21:03
Speaker 9: retailers too.
21:05
Speaker 2: What are consumers doing here? Because we hear about inflation
21:09
Speaker 2: really hitting folks that maybe don't own stocks, don't own bonds,
21:13
Speaker 2: don't own real estate. Now they're the ones that are
21:16
Speaker 2: really being hit by inflation. How does that get reflected
21:20
Speaker 2: in a retail sales number that shows some pretty good
21:22
Speaker 2: strength this month.
21:24
Speaker 9: You know here too, back to my word of the month,
21:27
Speaker 9: creativetivity or creative consumers are also getting creative.
21:31
Speaker 8: We know that they're getting better and.
21:33
Speaker 9: Better at seeking and finding those deals. Here's an interesting
21:38
Speaker 9: stat We surveyed over one thousand shoppers to find that
21:41
Speaker 9: one third of those shoppers are buying their groceries in bulk,
21:45
Speaker 9: and they're sharing with their friends and their neighbors, which
21:48
Speaker 9: is a great way for the lower income household to
21:51
Speaker 9: enjoy the savings that come with larger products that have
21:53
Speaker 9: a better price for counter for ounce. Typically speaking, the
21:56
Speaker 9: lower income households on fixed budgets are forced to buy
21:59
Speaker 9: those smaller products because of that lower price points. So
22:02
Speaker 9: this is a great option for them. And by the way,
22:05
Speaker 9: there could soon be an app for that, because there's
22:08
Speaker 9: an app for that in South Africa today, so it's
22:11
Speaker 9: only a matter of time until it gets here. I
22:13
Speaker 9: have no idea how that would work, but we also
22:15
Speaker 9: never thought that we would share rides with perfect strangers
22:18
Speaker 9: in a car that's driven by a perfect stranger.
22:19
Speaker 4: Of what we do that is really interesting and that
22:22
Speaker 4: would definitely certainly live in an apartment complex like that
22:25
Speaker 4: could make things quite interesting as well. Just so everyone's clear,
22:28
Speaker 4: I did research sunscreen for your hair. It's really for
22:31
Speaker 4: your scalp. But I still think like why not wear
22:33
Speaker 4: a hat? But fair point, this is why it's inflation.
22:36
Speaker 4: And I was just looking at you can get a
22:38
Speaker 4: twenty five pack of mini pickle cupcakes at Baked by
22:41
Speaker 4: Melissa's for thirty seven dollars. Wow, that's like a lot
22:45
Speaker 4: of money for little, teeny tiny cupcakes. Anyway, this is
22:48
Speaker 4: kind of your point. So, Jill, what have we learned
22:51
Speaker 4: though about all the discretionary fun stuff like services, spas, vacations, getaways,
22:56
Speaker 4: the stuff that was doing really well.
22:59
Speaker 8: You know, sonsumers are have pent up demand for that.
23:02
Speaker 9: They're just finding lower cost ways to achieve those, and
23:06
Speaker 9: so we might be seeing more in value, but I'll
23:09
Speaker 9: go back to the transaction or sorry, in volume, but
23:12
Speaker 9: I'll go back to the transactional value typically speaking, that's down.
23:15
Speaker 9: So they're doing more of that that we've done before,
23:19
Speaker 9: but they're doing it at a lower rate.
23:22
Speaker 3: So I see.
23:23
Speaker 2: Yeah, Joe, how about the back to school that's probably
23:26
Speaker 2: the next shopping season for you that you get a
23:29
Speaker 2: sense of how retaillers are doing, how consumers are doing.
23:31
Speaker 2: What's the expectation for back to school this year?
23:35
Speaker 9: So, you know, kudos to the three big retailers who
23:37
Speaker 9: really created a summer of savings and really jumped jumped
23:44
Speaker 9: into trying to create a season and what is otherwise
23:48
Speaker 9: a lower season right now, So we just got done
23:50
Speaker 9: with the Walmart Deal Days, Target Circle Week, Today's the
23:53
Speaker 9: kickoff of Amazon's summertime Prime Days. All of those have
23:56
Speaker 9: discounts on thousands of items with a focus.
23:59
Speaker 8: On that school and no.
24:00
Speaker 9: Plus, Amazon is doing things like ropping a new deal
24:04
Speaker 9: every five minutes, and so they're really swinging for the
24:06
Speaker 9: fences in terms of capturing trips, creating sales, and trying
24:11
Speaker 9: to meet the consumer with economic value.
24:15
Speaker 4: What do you think will happen if the Fed cuts rates?
24:18
Speaker 4: And I say that because if all of a sudden
24:20
Speaker 4: we get relief and there's fifty bases points of cuts
24:22
Speaker 4: in the next four months, do people have a lot
24:24
Speaker 4: more money to spend? Is it actually an increase spending?
24:29
Speaker 8: Oh, we talk a lot about this.
24:30
Speaker 9: I mean, typically speaking, lower interest rates feel the purchases
24:34
Speaker 9: of large things like cars and homes, and so when
24:36
Speaker 9: they're making those purchases that might actually trickle down to small,
24:40
Speaker 9: smaller spends within the household, but typically speaking initially they
24:44
Speaker 9: don't have a near end effect on those smaller spends.
24:47
Speaker 9: That said, consumers are very attractive to enticing loan options.
24:52
Speaker 9: So let's talk about the buy now, pay later market.
24:55
Speaker 9: That's up twelve percent on a year over year basis.
24:58
Speaker 9: It accounts for eighty seven billion dollars in debt. There's
25:01
Speaker 9: lots of different figures out there. It's expected to grow
25:04
Speaker 9: at a twenty five percent tagger over the next set
25:07
Speaker 9: seven years. So let's hope that consumers can pay those
25:10
Speaker 9: back because they come with very very steep late piece
25:13
Speaker 9: as well as credit risk. But it's indicative of the
25:16
Speaker 9: fact that consumers are enticed by attractive loan options.
25:20
Speaker 2: Talks about like trading down. Are people trading down from
25:24
Speaker 2: I don't know, Walmart and a target to maybe the
25:25
Speaker 2: dollar stores? Do we see that activity or they just
25:29
Speaker 2: try to be more frugal within the targets and the
25:31
Speaker 2: Walmarts of the world.
25:33
Speaker 9: Oh boy, you know, I'm not fine when somebody gives
25:36
Speaker 9: the answer mixed, But I'm going to give you the
25:38
Speaker 9: answer mixed.
25:39
Speaker 8: A lot of households actually are trading down.
25:42
Speaker 9: The reason that I see mixed though, is that we
25:43
Speaker 9: see some of those mainstream retailers trying to be a
25:46
Speaker 9: dollar store.
25:47
Speaker 8: So they're trying, so they are, they're.
25:50
Speaker 9: Rolling out more and more smaller packages at lower price
25:53
Speaker 9: point to be able to capture that dollar, that dollar trip.
25:58
Speaker 9: So it's really it's really but overall though a trade down.
26:02
Speaker 8: It just varies whether.
26:04
Speaker 9: We're talking about trading down in categories like a stage
26:06
Speaker 9: to Aposta, treading down in channels from mainstream grows for
26:09
Speaker 9: to dollar, or trading down in brands from premium brand
26:13
Speaker 9: to a value or even private label.
26:16
Speaker 4: So great, Jill, we really appreciate you. That was just
26:18
Speaker 4: so interesting. I'm like now deep in the whole of
26:21
Speaker 4: all this weird stuff of upflation. So that's going to
26:23
Speaker 4: stay with me for a while. Jill Blanchhard, President of
26:25
Speaker 4: Enterprise Credit Client Solutions, have Advantage Solutions, Joining us from Chicago, Illinois.
26:33
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
26:37
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26:40
Speaker 1: Auto with the Bloomberg Business Act. You can also listen
26:43
Speaker 1: live on Amazon Alexa from our flagship New York station,
26:47
Speaker 1: Just say Alexa playing Bloomberg eleven thirty.
26:51
Speaker 4: We are live in the Active broke A studio right
26:54
Speaker 4: here in midtown Manhattan. It's like one hundred degrees out today. Yeah,
26:58
Speaker 4: are you psyched that you're back in the office?
27:01
Speaker 2: Subway platform is gonna beat something I'm looking forward to today.
27:04
Speaker 4: Oh yeah, ditto, ditto. And this is when you want
27:06
Speaker 4: to be working from home, right you get the breeze Jersey.
27:09
Speaker 4: Sure he's broadcasting from the beach there, it is.
27:11
Speaker 2: That's my jam, But that's not the case. We are
27:14
Speaker 2: here in the city and I want to talk commercial
27:16
Speaker 2: real estate because this is just a critical, critical issue
27:19
Speaker 2: for the economy, for banks obviously, for the folks involved
27:22
Speaker 2: in the real estate business. And there's no better person
27:24
Speaker 2: to talk to for commercial real estate than Douglas Durst.
27:27
Speaker 2: He's a chairman a Durst Organization. Joining us live here
27:30
Speaker 2: on our Bloomberg at Directive Broker studio. We appreciate that, Douglas,
27:33
Speaker 2: Thank you so much for joining us here. The party
27:36
Speaker 2: line out there is commercial, particularly office real estate in
27:41
Speaker 2: urban areas, it's bad and it's going to get worse.
27:45
Speaker 2: So maybe we don't know how bad it is, is
27:48
Speaker 2: that the case or there are different layers under.
27:50
Speaker 5: That, it's certainly the case that you don't know how
27:52
Speaker 5: bad it is because it's not bad, Okay. In our portfolio,
27:58
Speaker 5: we are almost ninety five percent least across the portfolio
28:04
Speaker 5: except for a building that we started construction pre pandemic
28:08
Speaker 5: had to stop, and at eight twenty five Third Avenue,
28:12
Speaker 5: we're now about forty percent least in a year. Our
28:17
Speaker 5: other buildings are mostly fully occupied. At twenty nineteen, pre pandemic,
28:26
Speaker 5: we had three large office buildings vacated because tenants moved elsewhere.
28:31
Speaker 5: Those buildings are eleven fifty five where we just moved
28:34
Speaker 5: to one Bryant Park and building.
28:38
Speaker 4: Yeah, I mean, like you have some of the really
28:41
Speaker 4: amazing buildings. Do you have thirteen million square feet of
28:44
Speaker 4: prime Manhattan office real estate like one Brian Park, like
28:48
Speaker 4: one World Trade Center? So how is it like to
28:52
Speaker 4: fill those buildings now? And what's the rent like and
28:55
Speaker 4: what's their pricing power? Like you just walk us through
28:58
Speaker 4: because you prime off this real estate.
29:01
Speaker 5: We do, and the rents are higher than a pre pandemic.
29:11
Speaker 5: Bank of America just took additional space our space at
29:14
Speaker 5: one Bryan Park, So that's why we had to move
29:17
Speaker 5: to eleven fifty five. We're signing leases in eleven fifty five,
29:23
Speaker 5: which is a building that was built in nineteen eighty
29:25
Speaker 5: four was vacated in twenty twenty eighteen by White and Case.
29:30
Speaker 5: We completely redid the building, added new windows and new
29:36
Speaker 5: air conditioning.
29:38
Speaker 4: Is that the one on sixth Avenue. That's the one
29:40
Speaker 4: on this so I used to work there. We called
29:42
Speaker 4: it to Dusk Star because it was like this huge
29:44
Speaker 4: black tower of nothingness.
29:47
Speaker 5: The Darth Vader building.
29:48
Speaker 3: Exactly.
29:49
Speaker 4: Yes, okay, so and you fixed it, you made it pretty.
29:52
Speaker 1: We did.
29:53
Speaker 5: We actually we were there until we moved to one
29:56
Speaker 5: Bryant Park and we were all a little worried about
30:00
Speaker 5: moving back because it had been very dark. But it's
30:03
Speaker 5: now very bright and as I said, it's ninety five
30:07
Speaker 5: percent full. I just toured the space of Global Relay.
30:13
Speaker 5: Most people have not heard of it. It's a fintech
30:15
Speaker 5: company and they're moving from Northwest Canada. They took the
30:22
Speaker 5: top of the building. They made a spectacular build out.
30:27
Speaker 5: I think it's one of the best in the city.
30:29
Speaker 5: It certainly equals space here at Bloomberg, which is terrific space.
30:36
Speaker 5: And they're going to be hiring over three hundred people
30:39
Speaker 5: for their new office. This was their first office in
30:42
Speaker 5: New York City. Fintech is a big movement mover in
30:46
Speaker 5: the office economy. The other issue that people don't realize
30:50
Speaker 5: is the tech companies start out very small, but as
30:57
Speaker 5: soon as they move in, they're expanding. We started what
31:00
Speaker 5: we call durst Ready, which allows tenants to move right
31:04
Speaker 5: in small space short term leases, and most of them
31:09
Speaker 5: stay and expand. Some some don't work out, obviously, but uh,
31:15
Speaker 5: it's it's the new companies, the new industries that are
31:18
Speaker 5: really growing in New York. The older industries are just
31:25
Speaker 5: not growing and that's not an issue.
31:27
Speaker 2: So what I guess what I've learned about the commercial
31:30
Speaker 2: real estate market over the last several years, and I've learned,
31:32
Speaker 2: you know, exponentially what I knew before is that if
31:36
Speaker 2: you have a quality buildings, and like the Bloomberg building
31:40
Speaker 2: here is in a quality buildings not a plus. Fine,
31:43
Speaker 2: your your least your occupant occupancies are great. But if
31:47
Speaker 2: you're anything less B or C, those are challenging. And
31:50
Speaker 2: those are some that people are concerned about the values,
31:53
Speaker 2: concerned about the debt associated with those buildings. How do
31:56
Speaker 2: you see that part of the New York market, the
31:58
Speaker 2: B and C.
31:59
Speaker 5: Level, the B levels, it really depends on the ownership
32:05
Speaker 5: and what they've done. We have buildings I don't I
32:09
Speaker 5: would consider as okay, okay, but the first building we
32:14
Speaker 5: built six fifty five Third Avenue. When we built it,
32:18
Speaker 5: it was two hundred East forty second Street. You know,
32:23
Speaker 5: preferences for address has changed, so it's now a third
32:26
Speaker 5: Avenue address. It was vacated to about forty percent two
32:32
Speaker 5: years ago. It's now eighty percent least as I said
32:36
Speaker 5: it was built in. I didn't say nineteen fifty five.
32:42
Speaker 5: And we keep investing in our buildings, keep modernizing them,
32:47
Speaker 5: and that way we add, we add tenants or keep tenants.
32:51
Speaker 4: So when we talk about in a macro sense, ah,
32:54
Speaker 4: the Fed's gonna lower rates, et cetera. Does that What
32:57
Speaker 4: does that mean to you? When you're already in a
32:59
Speaker 4: position where your buildings are mostly occupied, you can raise
33:03
Speaker 4: your rents. What does that mean?
33:07
Speaker 5: Well, it means that the office market is not a monolith.
33:11
Speaker 5: There are buildings that are going to continue to do
33:14
Speaker 5: well and others that are going to fail. But those
33:19
Speaker 5: buildings that don't survive are going to be purchased at
33:21
Speaker 5: a lower cost, people are going to invest in them,
33:25
Speaker 5: and they're going to come back. Because the office market
33:27
Speaker 5: is continuing to grow and expand, where we leased a
33:32
Speaker 5: million square feet last year, which is the highest we
33:36
Speaker 5: leased in the past six years. So the office market
33:42
Speaker 5: is good. There are buildings that for because mostly interest rates.
33:48
Speaker 5: When when interest rates triple I think close to triple,
33:53
Speaker 5: the values go down. And that's if you have If
33:57
Speaker 5: you're financed at seven you're eighty percent. We only we
34:02
Speaker 5: try and stay under fifty percent. All of a sudden,
34:05
Speaker 5: your building is worth half of or not half, but yeah,
34:09
Speaker 5: considerably less than what it was and you cannot refinance.
34:12
Speaker 3: So that's kind of where I want to go.
34:13
Speaker 2: What is the lending market like today for commercial real estate?
34:17
Speaker 2: Does it depends? I mean, I assume your relationship with
34:19
Speaker 2: your bankers are very strong. But for the average commercial
34:23
Speaker 2: real estate, how are things up there?
34:25
Speaker 5: For the average commercial real estate and even for us,
34:29
Speaker 5: it's very, very tough. The FED has really clamped down
34:34
Speaker 5: on all commercial real estate and they do not realize
34:39
Speaker 5: that it's not monolithic, that not all buildings are in
34:42
Speaker 5: bad shape. We had to struggle for some of our
34:47
Speaker 5: loans to me put it that way, we had to
34:56
Speaker 5: really push to get our loans renewed right, and no
35:02
Speaker 5: matter how much we showed that we were in good shape,
35:04
Speaker 5: it's the FED that's pushing the reserves for banks that
35:08
Speaker 5: make it difficult for them to make these loans.
35:11
Speaker 4: Before we let you go, Are you buying right now?
35:15
Speaker 5: No, No, there's We're continuing to improve our buildings to
35:21
Speaker 5: invest our money in new buildings. There are a lot
35:25
Speaker 5: of people out there, a lot of these funds which
35:27
Speaker 5: we don't have at this moment, who are going to
35:31
Speaker 5: be picking up properties. So the market for the buildings
35:35
Speaker 5: that don't work is very strong.
35:38
Speaker 4: Really great to get your perspective. Thank you so much
35:40
Speaker 4: for coming in. There's one hundred degree degree day. We
35:43
Speaker 4: really appreciate that. Douglas Durst, chairman of the Durst Organization,
35:47
Speaker 4: resides in my former employment. I mean, we're going back
35:50
Speaker 4: twenty years, but still, yeah, I worked at White and Case.
35:52
Speaker 4: I was a paralegal man. Oh oh yeah, I worked
35:55
Speaker 4: at night. I worked from four pm until midnight.
35:58
Speaker 6: Wow.
35:59
Speaker 4: Yeah, okay, I did really great, amazing things like FedExing
36:03
Speaker 4: documents and faxing things. Fact, because that was still a thing.
36:08
Speaker 4: Page and look.
36:10
Speaker 3: At me now looking up.
36:14
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
36:18
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
36:21
Speaker 1: Auto with the Bloomberg Business Act. You can also listen
36:24
Speaker 1: live on Amazon Alexa from our flagship New York station
36:28
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty.
36:32
Speaker 4: All right, let's go to Jody Schneider, now a political
36:34
Speaker 4: news director for Bloomberg Television and Radio. She's standing by
36:37
Speaker 4: in Milwaukee. Jody, the event, obviously last night was President
36:41
Speaker 4: former President Trump walking in with the bandage on his
36:43
Speaker 4: ear and then declaring that VP pick of JD. Vance,
36:46
Speaker 4: Senator from Ohio, walk me through what you learned last night?
36:51
Speaker 10: Well, yesterday we did have that on the announcement of JD.
36:56
Speaker 10: Vance as the pick was done in the afternoon, and
36:59
Speaker 10: then he showed up at the at the venue here
37:03
Speaker 10: at the convention Hall earlier in the evening. And then
37:07
Speaker 10: last night we did see former President Trump, uh, the
37:11
Speaker 10: almost nominee he will well he's been he's been now
37:15
Speaker 10: designated as a nominee who just has to give a
37:17
Speaker 10: speech on Thursday night, but he and JD. Vance were
37:21
Speaker 10: shown together. Neither of them spoke their speeches will be
37:25
Speaker 10: Wednesday and Thursday night. But it is clearly a passing
37:28
Speaker 10: of the torch to a new generation, making sure that
37:33
Speaker 10: this is the Uh, the whole philosophy of MAGA and
37:38
Speaker 10: president former President Trump's philosophy has been given now to
37:43
Speaker 10: a new generation because the vice presidential pick jd Vance
37:48
Speaker 10: espouses those same principles.
37:50
Speaker 2: Well, he didn't always espouse those same principles. Did he
37:53
Speaker 2: give us a little sense of kind of how jd
37:55
Speaker 2: Vance has evolved over the last several years as a politician.
37:59
Speaker 10: Yeah, that's right, he said, And he said some well
38:02
Speaker 10: noted differences with former President Trump. He once called him noxious.
38:07
Speaker 10: He has. He's somebody who was a First of all,
38:12
Speaker 10: he had a business career before he was a politician.
38:16
Speaker 10: He was a venture capitalist. He wrote a best selling book,
38:20
Speaker 10: Hill Billy Elogy, which is said to be, Uh, some
38:23
Speaker 10: of the principles in there about how he grew up
38:25
Speaker 10: poor in Ohio and kind of overcame that. It's been
38:30
Speaker 10: said to be a populist book, trying to reach out
38:33
Speaker 10: to more working class voters. Uh. He evolved from that
38:37
Speaker 10: and then became a United States Senator from Ohio. In
38:41
Speaker 10: recent years he has honed very closely to the principles
38:45
Speaker 10: that Donald Trump UH talks about, and he is said
38:49
Speaker 10: to have been a favorite UH that Donald Trump's sons
38:53
Speaker 10: Eric and Donald Trump Junior pushed for him because they
38:57
Speaker 10: saw him as would he would continue the magabrand Donald
39:02
Speaker 10: Trump's brand.
39:03
Speaker 3: Into the future.
39:04
Speaker 10: He's notably, he's thirty nine years old, not even forty
39:07
Speaker 10: years old, you know, a whole different generation than Donald Trump.
39:14
Speaker 4: It was interesting, Jody, because part of the rhetoric yesterday
39:17
Speaker 4: after the potential assassination was that President Trump was speaking
39:20
Speaker 4: about unity, which is something he doesn't do very often.
39:23
Speaker 3: JD.
39:23
Speaker 4: Vance, however, went to the far right and was saying, look,
39:27
Speaker 4: blaming President Biden for the attack on President Trump, very
39:31
Speaker 4: very divisive, and so some of people were talking about
39:33
Speaker 4: the fact that would President Trump pick a United vice president?
39:37
Speaker 4: He didn't. Did he do that because he also will
39:40
Speaker 4: stay divisive? Or does it give now President Trump the
39:42
Speaker 4: ability to be more of a unifier of the Republican
39:45
Speaker 4: Party while JD. Vans holds the holds the core.
39:50
Speaker 10: Yeah, that's a good question, and I think there is
39:52
Speaker 10: some of that. You know, Donald Trump now can sort
39:54
Speaker 10: of say, okay, you know, we don't want. You know,
39:57
Speaker 10: he can come out, especially since he was a target
39:59
Speaker 10: of an assassination attempt. He can come out and say
40:02
Speaker 10: there's no place for political violence. And Jade Vance can
40:06
Speaker 10: kind of, you know, be the tougher one on that right.
40:08
Speaker 10: He can be the one that says the things that
40:10
Speaker 10: Donald Trump, the top of the ticket doesn't want to say.
40:13
Speaker 10: But clearly there had been some talk of perhaps, you know,
40:17
Speaker 10: Donald Trump was going to pick somebody who could reach
40:19
Speaker 10: out more, say to women voters, to racial minorities for instance,
40:25
Speaker 10: you know, trying to get some of these swing state voters.
40:28
Speaker 10: But this is very much a doubling down on the brand,
40:32
Speaker 10: doubling down on you the core of their constituency, the
40:36
Speaker 10: white male, working class voters.
40:38
Speaker 2: All right, Jody, thank you so much for joining us.
40:40
Speaker 2: Jody Schneider, she's a political news director for Bloomberg Television
40:43
Speaker 2: and News. Joining us remotely from Milwaukee, Wisconsin, the site
40:47
Speaker 2: of the Public National Convention.
40:50
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