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Stocks Slip from Records; U.S. Consumer Comfort Climbs · Bloomberg Intelligence

• 0:02
  Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,
• 0:05
  Speaker 1: along with my co host Lisa Brahma wits. Each day
• 0:07
  Speaker 1: we bring you the most noteworthy and useful interviews for
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  Speaker 1: you and your money, whether at the grocery store or
• 0:12
  Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
• 0:15
  Speaker 1: podcast or wherever you listen to podcasts, as well as
• 0:17
  Speaker 1: at Bloomberg dot com. Has some economic data today, existing
• 0:21
  Speaker 1: home sales, initial jobs claims each came into I would
• 0:25
  Speaker 1: say slightly weaker than I expecting. Nothing major, but again
• 0:27
  Speaker 1: on the margin, a little bit weaker. To kind of
• 0:29
  Speaker 1: break down what we're seeing on the economic front, we
• 0:31
  Speaker 1: welcome a good friend, Danielle di Martino Booth. She's a
• 0:34
  Speaker 1: chief executive officer and chief strategist at Quill Intelligence. She
• 0:37
  Speaker 1: joins us here in our Bloomberg Inactor Brooker Studios. So, Danielle,
• 0:41
  Speaker 1: on the margin, what's some of the recent data telling you, well,
• 0:45
  Speaker 1: there's there's good and there's bad. Uh. You know, the
• 0:47
  Speaker 1: power printing press is powerful, and I think that it
• 0:52
  Speaker 1: is It is the FEDS, not Queie, that is a
• 0:55
  Speaker 1: much greater force in propelling the nascent recovery that were
• 1:00
  Speaker 1: seeing on the industrial side Empire State Philly fed this morning,
• 1:03
  Speaker 1: we're seeing future inventories rise appreciably. That tends to be
• 1:07
  Speaker 1: a precursor to I s M new orders increasing. That's
• 1:10
  Speaker 1: going to be very well received by markets because they're
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  Speaker 1: gonna say, okay, we've escaped the third industrial recession of
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  Speaker 1: the current longest expansion in US history. You know, the
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  Speaker 1: flip side or some of the things that we're seeing
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  Speaker 1: coming out of initial jobless claims. Continuing jobless claims were
• 1:25
  Speaker 1: falling very closely, because if continuing jobless claims stop falling,
• 1:29
  Speaker 1: the improvement in the labor market has been exhausted. So
• 1:32
  Speaker 1: we've seen seven straight weeks of of that stagnation. Continuing
• 1:37
  Speaker 1: jobless claims are up zero point seven percent, so pretty
• 1:40
  Speaker 1: hard to see on a graph, but nevertheless they're They're
• 1:43
  Speaker 1: up for the first time since December of two thousand
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  Speaker 1: and nine. And for example, in this morning's existing home
• 1:49
  Speaker 1: sales report, we saw homes priced under two dollar. We
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  Speaker 1: saw those sales fall. That's not what J. Powell wants. J.
• 1:55
  Speaker 1: Pale wants for his transmission mechanism of lower interest rates
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  Speaker 1: to work for the people who need to buy home
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  Speaker 1: So this doesn't all sound absolutely dreadful when it comes
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  Speaker 1: to the consumer, because we still are near historic lows
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  Speaker 1: and very full employment. What is the practical takeaway from
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  Speaker 1: the bottoming out or sort of the hitting of a
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  Speaker 1: sort of peak perhaps in the consumer? Yeah, I think
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  Speaker 1: I think what the message is. And again initial jobless
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  Speaker 1: claims have surprised the upside now two weeks runing two
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  Speaker 1: seven and twenty seven UM. These are the highest levels
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  Speaker 1: we've seen since early uh this year. But I think
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  Speaker 1: that the takeaway is that we have had the most
• 2:32
  Speaker 1: extraordinary expansion in US labor market history. I mean, it
• 2:36
  Speaker 1: blows away prior cycles by a mile, and a lot
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  Speaker 1: of that has had to do with the skills mismatch
• 2:42
  Speaker 1: and how very valuable any employee has been two companies,
• 2:46
  Speaker 1: and how how hard they've held onto them through these
• 2:50
  Speaker 1: ups and downs in the economy. So for us to
• 2:53
  Speaker 1: see companies finally relenting and pushing through the beginnings of
• 2:59
  Speaker 1: layoffs I think is concerning because companies have been so
• 3:03
  Speaker 1: remissed to let go of their employees. So just looking
• 3:06
  Speaker 1: at the FED funds futures rate UM after the FED
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  Speaker 1: minutes were released yesterday, looks like the markets discounting a
• 3:12
  Speaker 1: rate cut maybe sometime mid to third quarter next year, September, right,
• 3:17
  Speaker 1: Do you think the FED can wait that long based
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  Speaker 1: upon maybe some of the rolling over a little bit?
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  Speaker 1: You know, I think that, uh, we have to bear
• 3:25
  Speaker 1: in mind. John Williams is the Vice chair of the
• 3:27
  Speaker 1: Federal Open Market Committee, so he's technically second in command,
• 3:31
  Speaker 1: not Rich Claradat, who's vice chair of the board UM
• 3:34
  Speaker 1: and his comments I've felt a few days ago were
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  Speaker 1: very devish in nature, and I think that the market
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  Speaker 1: may be over discounting how data dependent that the FED
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  Speaker 1: is going to be and whether or not they will
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  Speaker 1: be forced. And we have no idea what December is
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  Speaker 1: going to bring in terms of the repo market and
• 3:51
  Speaker 1: liquidity issues and year end window dressing at banks. We
• 3:54
  Speaker 1: don't know how much disruption there might be going into
• 3:58
  Speaker 1: the new new year, and how whether or not that
• 4:01
  Speaker 1: September realistic. So you know, when you came in here,
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  Speaker 1: we were talking about this bottoming out, some of the
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  Speaker 1: data having to do with the consumer, some signs of
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  Speaker 1: brightness in the industrial sector, and you said that you
• 4:13
  Speaker 1: see a shift coming or the consumer, which has powered
• 4:16
  Speaker 1: the economic expansion, is going to start deteriorating in terms
• 4:20
  Speaker 1: of its economic condition, and we're going to see a
• 4:22
  Speaker 1: resurgence in industrials. Can you explain a little bit further
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  Speaker 1: And I'm you know, I'm not I'm not certain how
• 4:29
  Speaker 1: strong it's going to be. If you look, for example,
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  Speaker 1: at Manufacturing Powerhouse Germany, it did not slip into recession.
• 4:37
  Speaker 1: And I think Germany Germany is a great barometer for
• 4:39
  Speaker 1: our industrial sector because we've been lagging. We've been following
• 4:43
  Speaker 1: what happens in Germany, and what we're anticipating right now
• 4:46
  Speaker 1: is stagnation overseas, not a major rebound, so you know,
• 4:51
  Speaker 1: we might rebuild stockpiles in the coming months. That's going
• 4:54
  Speaker 1: to be again seeing very very favorably. The market's favorite
• 4:58
  Speaker 1: leading indicator is I s M new orders and one
• 5:01
  Speaker 1: of the reasons market's got a little shaky was because
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  Speaker 1: we had three months in a row of negative prints
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  Speaker 1: on I s M new orders. That popping back above
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  Speaker 1: that fifty line between expansion and contraction I think would
• 5:14
  Speaker 1: be seen as favorable. I want to see how much
• 5:16
  Speaker 1: momentum it's going to have going into the year, whether
• 5:19
  Speaker 1: there's going to be followed through because we're not seeing
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  Speaker 1: coming out of Detroit. What we would prefer with the
• 5:25
  Speaker 1: with the U S automakers, that's going to count next year.
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  Speaker 1: Danielle de Martino Booth, thank you, thank you, really smart,
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  Speaker 1: chief executive officer and chief strategistic Quill Intelligence, also a
• 5:35
  Speaker 1: former FED researcher and employee over in Dallas. There is
• 5:53
  Speaker 1: a consensus of sorts heading into twenty that it will
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  Speaker 1: be a pretty good year, potentially if in double it's
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  Speaker 1: yet again with respect returns on US equity industries, although
• 6:04
  Speaker 1: perhaps Europe may outperform. But how contingent is this on
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  Speaker 1: a trade deal on a lot of things that are
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  Speaker 1: all but certain joining US now? Katerina Seminetti, she is
• 6:15
  Speaker 1: UBS Financial Services private wealth advisor. Katerina, how much do
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  Speaker 1: you buy into this consensus? I think it's primarily because
• 6:22
  Speaker 1: phase one. To me at least, it's a sure thing
• 6:25
  Speaker 1: because when you look at the components that go into
• 6:27
  Speaker 1: phase one, right, it's all the pieces that both parties
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  Speaker 1: basically agree on and they I will even say more
• 6:33
  Speaker 1: so the pieces that they need. So China agreed that
• 6:37
  Speaker 1: to buying UM to buying US agricultural goods, that's a
• 6:42
  Speaker 1: done deal, right, you know, in our case we would
• 6:44
  Speaker 1: like to see more UM currency transparency, We would like
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  Speaker 1: to have their markets open to our financial institutions. So,
• 6:50
  Speaker 1: despite of the news of the last couple of days,
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  Speaker 1: I believe that Phase one is going through and also
• 6:55
  Speaker 1: think that market is almost taking it for granted. It's
• 6:58
  Speaker 1: almost like it's it's bought in and you know already
• 7:01
  Speaker 1: built into the consensus that it's going to happen. And
• 7:04
  Speaker 1: I think when this happens, we're going to have a
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  Speaker 1: pretty positive reaction. My concern is not Phase one, it's
• 7:10
  Speaker 1: Phase two, because I think the components of Phase two
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  Speaker 1: are significantly more important and also is something that we
• 7:16
  Speaker 1: don't quite have an agreement on. So as one of
• 7:19
  Speaker 1: the other things obviously moving the markets, Number one is
• 7:21
  Speaker 1: Lisa raised, is the trade deal that seems to be
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  Speaker 1: such really driving kind of market sentiment and market performance.
• 7:27
  Speaker 1: Number two might be the Federal Reserve, which has been
• 7:29
  Speaker 1: very accommodative through the market, seems to be discounting maybe
• 7:34
  Speaker 1: one more rate cut next year. Is that kind of
• 7:36
  Speaker 1: your view and the view of UBS So we had
• 7:39
  Speaker 1: a you that Fed is going to cut continue cutting grades.
• 7:43
  Speaker 1: As a matter of fact, our view even just from
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  Speaker 1: quite recently was that they're going to cut another seventy
• 7:48
  Speaker 1: five basis points going into the next year. But we
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  Speaker 1: are holding back on that view now because we think
• 7:54
  Speaker 1: that the benefit of what's happening right now is we
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  Speaker 1: had fed that is extremely data driven. An economic data
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  Speaker 1: that is coming in is not negative, you know, it's mixed,
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  Speaker 1: but it is still quite positive. So I think that
• 8:05
  Speaker 1: FAD's reaction is going to be very much linked to
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  Speaker 1: the results of the trade negotiations. So if we have
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  Speaker 1: a positive outcome, if Phase two starts off, well, they
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  Speaker 1: might not cut, they might hold off because it is
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  Speaker 1: such a powerful tool in their arsenal, those rate cuts.
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  Speaker 1: I think they're going to be reactive to, you know,
• 8:24
  Speaker 1: what they see, all right, So if you buy into
• 8:26
  Speaker 1: the census idea that things are going to be pretty
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  Speaker 1: good next year, how do you square that with surveys
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  Speaker 1: out of ubs showing that wealthy individuals are getting increasingly perished.
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  Speaker 1: That is very true. So I think that we have
• 8:39
  Speaker 1: to look at the time frames. I believe there is
• 8:41
  Speaker 1: going to be a very positive reaction to phase one.
• 8:44
  Speaker 1: Once we get to phase two. It's an uncharted territory.
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  Speaker 1: It's quite frankly, you know, like the the you know,
• 8:51
  Speaker 1: the the season two of Succession that I know so
• 8:53
  Speaker 1: so many of the radio hosts here seem to love.
• 8:56
  Speaker 1: And it's a great show because it isn't charted territory.
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  Speaker 1: And we've leave that there might be a sell off. Now,
• 9:03
  Speaker 1: we think that there might be a cell off, but
• 9:04
  Speaker 1: we think the severity of the sell off will not
• 9:06
  Speaker 1: be quite as extreme as markets anticipated. And as a
• 9:10
  Speaker 1: matter of fact, you know, we think the likelihood of
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  Speaker 1: actual recession is very low. We think it might happen again,
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  Speaker 1: It all depends on the trade. But we think sell
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  Speaker 1: off is likely. And that's what we're getting from our clients.
• 9:21
  Speaker 1: When clients call us and they're concerned, they are concerned
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  Speaker 1: about the cell off, they are concerned about the makeup
• 9:26
  Speaker 1: of their portfolios, and they're asking us, you know, quite frankly,
• 9:29
  Speaker 1: what to do in repositioning. So what are you telling
• 9:31
  Speaker 1: them now about positioning? Because we you know that the
• 9:34
  Speaker 1: fourth quarter last year, particularly December, was such a shock
• 9:38
  Speaker 1: to the marketplace, to the decline in the equity markets. Um,
• 9:41
  Speaker 1: and I'm sure as we get, you know, come up
• 9:43
  Speaker 1: to that anniversary again this year, some of your clients
• 9:45
  Speaker 1: are gonna be calling and asking what do you how
• 9:46
  Speaker 1: do you telling them to position themselves? So we tell
• 9:48
  Speaker 1: them to broader the time frame, And to your point,
• 9:51
  Speaker 1: I think that the fourth quarter of last year was
• 9:54
  Speaker 1: a really good practice. You know, it's almost like a
• 9:57
  Speaker 1: really good test for all of us for what's to come.
• 9:59
  Speaker 1: And there are several pieces in the portfolio design that
• 10:02
  Speaker 1: come into playing here. First of all, liquidity, so we
• 10:04
  Speaker 1: tell clients number one, going into turbulent markets, going into
• 10:07
  Speaker 1: volatile markets, have enough liquidity on hand, because then you know,
• 10:12
  Speaker 1: if we go into the prolonged period of volatility of
• 10:14
  Speaker 1: negative markets, we will not have to liquidate their portfolios.
• 10:18
  Speaker 1: The second side is of course focused on yield, focused
• 10:21
  Speaker 1: on the counter cyclical asset classes like real estate. UM
• 10:25
  Speaker 1: really really changing around and rebalancing and repositioning of fixed
• 10:29
  Speaker 1: income portfolios because when people think, um that we need
• 10:33
  Speaker 1: to pursue recession prove their portfolios, they focus on equity,
• 10:36
  Speaker 1: but but fixed income quite frankly, it is just as
• 10:38
  Speaker 1: important going forward. What's your biggest concern. My biggest concern
• 10:45
  Speaker 1: is that investors who are not prepared are going into
• 10:50
  Speaker 1: this market with too much of a bullish outlook, and
• 10:53
  Speaker 1: that concern goes back to you know, my days when
• 10:56
  Speaker 1: I started as a new financial advisor in and if
• 10:59
  Speaker 1: you remember, the timeframe was very similar when the talks
• 11:02
  Speaker 1: were about upcoming uh possible upcoming recession. But yet that
• 11:06
  Speaker 1: was the best performing here and people almost got a
• 11:09
  Speaker 1: little cavalier, you know, a little too brave and you know,
• 11:12
  Speaker 1: overweight and equities Karatism and any Thank you so much
• 11:14
  Speaker 1: for joining us, Katarina uh sim in any ubs Financial Services,
• 11:17
  Speaker 1: Private Wealth Management. Let's continue our discussion of economics. The
• 11:37
  Speaker 1: Conference Board this morning released its leading economic indicator. To
• 11:40
  Speaker 1: walk us through the details, Bart van Ar, chief economist
• 11:44
  Speaker 1: at the conference aboard Bar, thanks so much for joining
• 11:46
  Speaker 1: us here on our Bloomberg in our Actor Broker studio.
• 11:48
  Speaker 1: What did the data tell you today, Well, the data
• 11:50
  Speaker 1: shows for the third month that we have a moderate decline.
• 11:53
  Speaker 1: But perhaps what's a little more important is that on
• 11:55
  Speaker 1: a six month basis, it's averaging it out a little bit.
• 11:57
  Speaker 1: We now see your very modest decline. It's only a
• 11:59
  Speaker 1: point one percent points, so it's nothing to really hugely
• 12:02
  Speaker 1: panic about. What's interesting are some of the underlying changes
• 12:06
  Speaker 1: that we're seeing in the index. So just carry on. Well,
• 12:11
  Speaker 1: what is most important is that in the previous months,
• 12:14
  Speaker 1: which was to a large extent driven by the decline
• 12:16
  Speaker 1: in manufacturing. Uh and that actually is still a little
• 12:19
  Speaker 1: bit of that. They're certainly obviously you know, new orders
• 12:22
  Speaker 1: have still is still quite negative. But um, what we
• 12:25
  Speaker 1: see now in this month, actually the labor market shows
• 12:28
  Speaker 1: a little bit of weakening. So one of our underlying
• 12:30
  Speaker 1: indexes is the average work week. One of the underlying
• 12:33
  Speaker 1: indexes initial claims. Both of them are now adding negatively
• 12:36
  Speaker 1: to the index. Now that sounds like bad news, but
• 12:39
  Speaker 1: let's not forget that the labor market has been extraordinary,
• 12:42
  Speaker 1: extraordinary strong, so at some point we would expect this,
• 12:45
  Speaker 1: So on balance, we actually think this is actually not
• 12:48
  Speaker 1: a terrible result. We really need to see how that's
• 12:50
  Speaker 1: going to evolve over the next few months. Is your
• 12:51
  Speaker 1: leading economic indicator weighted similarly to the US economy, which
• 12:55
  Speaker 1: is you know, two thirds seventy the consumer well leading
• 12:59
  Speaker 1: a con get next to always put a little bit
• 13:01
  Speaker 1: more emphasis on production and manufacturing, and a lot of
• 13:04
  Speaker 1: that is to that's where you have a lot more
• 13:05
  Speaker 1: of the volatility, and a lot of that is playing
• 13:08
  Speaker 1: through in the rest of the economy. Services tend to
• 13:10
  Speaker 1: be much more stable. The consumer tends to be very strong,
• 13:13
  Speaker 1: but it are exactly those elements actually services and consumers
• 13:16
  Speaker 1: that sort of keep us again a little bit more
• 13:18
  Speaker 1: moderate on making sure the huge implications from this negative
• 13:22
  Speaker 1: number today. It is interesting though that the trend is
• 13:25
  Speaker 1: shifting away from the steady improvement that we had been seeing,
• 13:29
  Speaker 1: particularly with the consumer, and we saw that again today
• 13:32
  Speaker 1: with the jobless claims just taking up a touch and
• 13:34
  Speaker 1: really just a fraction and from very very very low rate.
• 13:38
  Speaker 1: But at what point do you have to start paying
• 13:40
  Speaker 1: more attention to this is a sign of a weakening consumer, Well,
• 13:44
  Speaker 1: you first have to see it from multiple months. You
• 13:46
  Speaker 1: have to see considerably more layoffs happening over time, and
• 13:49
  Speaker 1: again there's nothing of that in the works. We get
• 13:51
  Speaker 1: a holiday season coming up. It looks actually pretty strong
• 13:54
  Speaker 1: as far as the numbers are are giving us projections
• 13:57
  Speaker 1: right now, But is that a leading indicator or a
• 13:59
  Speaker 1: lagging indicator By the time that it gets to the
• 14:01
  Speaker 1: point where where where companies are like consumers, it's a
• 14:04
  Speaker 1: good point. Consumers and labor markets to a large extent
• 14:07
  Speaker 1: are a coincident indicators. So there are actually an assessment
• 14:10
  Speaker 1: of the current situation, and again when we look at
• 14:12
  Speaker 1: the coincident part of this index, so assessment of what's
• 14:15
  Speaker 1: happening now, it's actually even stronger than it was in
• 14:17
  Speaker 1: previous months. So from the Federal Reserve, they seem to
• 14:20
  Speaker 1: be suggesting if you look at the FED fund futures, right,
• 14:22
  Speaker 1: you know, maybe one more cut in September. This zer
• 14:26
  Speaker 1: leading economic indicator kind of kind of makes sense given
• 14:30
  Speaker 1: kind of how the Fed's thinking about it right now. Absolutely,
• 14:33
  Speaker 1: I think, you know we have to cut. We just
• 14:35
  Speaker 1: had this past month. We do you really think that
• 14:38
  Speaker 1: the Father is not going to wait and see how
• 14:39
  Speaker 1: these numbers are going to evolve. And again, you know,
• 14:42
  Speaker 1: this sort of slightly negative number was to be expected
• 14:45
  Speaker 1: this This market has been so strong for such a
• 14:47
  Speaker 1: long time, this economy, that we would expect this leveling off.
• 14:50
  Speaker 1: So yeah, it's going to be a pause for the
• 14:52
  Speaker 1: time being. Earlier the show, we were speaking with Danielle T.
• 14:54
  Speaker 1: Martino Booth and she was talking about a bit of
• 14:56
  Speaker 1: a resurgence that we're seeing on some industrial measures and
• 15:00
  Speaker 1: that she expects some sort of gains to be had
• 15:03
  Speaker 1: in that sector next year. What are you saying, well, actually,
• 15:07
  Speaker 1: this morning, the Philadelphia fat manufacturing surface showed up a
• 15:10
  Speaker 1: little bit, So there are some numbers that are pointing
• 15:12
  Speaker 1: in the direction. But look, let's that's not full ourselves.
• 15:14
  Speaker 1: Manufacturing production is in deep trouble and it's still thinking.
• 15:18
  Speaker 1: But I do think that there might be something happening here.
• 15:21
  Speaker 1: We're particularly looking at China because a lot of this
• 15:23
  Speaker 1: decline in manufacturing production really or sort of originated in
• 15:27
  Speaker 1: China about two years ago. There we actually see a
• 15:30
  Speaker 1: little bit of a silver lining, A lot of overcapacity
• 15:32
  Speaker 1: is gone. China actually begin to stimulate the economy a
• 15:35
  Speaker 1: little bit in order to avoid a further slowdown, and
• 15:37
  Speaker 1: that will spill itself through into the global economy. So yeah,
• 15:40
  Speaker 1: we would tie onto this idea that that we might
• 15:42
  Speaker 1: see in an easy or perhaps even the bottoming out
• 15:44
  Speaker 1: of many production off there, you have a recession in
• 15:46
  Speaker 1: your model at any point, Well, yeah, at some point,
• 15:50
  Speaker 1: at some point, the recession is going to happen. But
• 15:52
  Speaker 1: you know, these indexes are looking sort of six months out.
• 15:55
  Speaker 1: I would go as far as say, you know, I
• 15:57
  Speaker 1: dare to say something about the next nine months. I
• 15:59
  Speaker 1: think until the sun rock next year, I'd be surprised
• 16:02
  Speaker 1: if the US economy would run into huge trouble with
• 16:04
  Speaker 1: the big R word, the big word. There you go,
• 16:09
  Speaker 1: all right, So what did you think in terms of
• 16:12
  Speaker 1: the response from CEO is with respect to trade, we
• 16:15
  Speaker 1: are getting headlines every day that give us a different story.
• 16:19
  Speaker 1: How much is that imperative for their modeling forms. There's
• 16:22
  Speaker 1: something unusual, of course, at a moment about this situation
• 16:26
  Speaker 1: where the consumers are still very confident. Our consumer confidence
• 16:29
  Speaker 1: in the confidence world keeps you at a record levels,
• 16:32
  Speaker 1: a little bit more volatile the last few months, whereas
• 16:35
  Speaker 1: this business confidence index, which is the other thing we do,
• 16:38
  Speaker 1: has actually been declining over and over again. We know
• 16:40
  Speaker 1: that a lot of that is tied to the trade disputes.
• 16:43
  Speaker 1: We've asked CEO, is this We see it in our
• 16:45
  Speaker 1: service that they do tie these kind of things. So
• 16:47
  Speaker 1: there was a little bit of a feel in the
• 16:49
  Speaker 1: last two three weeks that we will be getting somewhere.
• 16:51
  Speaker 1: But you know, has the spread ever been further apart
• 16:55
  Speaker 1: in terms of the business confidence versus consumer confidence? Not
• 16:58
  Speaker 1: in the past two decades. Would say this is this
• 17:00
  Speaker 1: is pretty unusual. But again it's also, of course, this
• 17:04
  Speaker 1: whole trade dispute is pretty unusual, so it's perhaps not
• 17:06
  Speaker 1: surprising that CEOs are reacting so much strongly to this.
• 17:09
  Speaker 1: Do you see that in your is it shopping your
• 17:12
  Speaker 1: data anywhere? Maybe business investments something like that. Yes, we
• 17:15
  Speaker 1: we do have manufactures new orders in there, and again
• 17:19
  Speaker 1: that actually picked up a little bit this month. But
• 17:21
  Speaker 1: you know these numbers are very val volatile, so we
• 17:24
  Speaker 1: we never take too many implications of a month of
• 17:26
  Speaker 1: a month. It's the six months average that is important
• 17:29
  Speaker 1: for it. And there again I would say maybe easy
• 17:31
  Speaker 1: at this point in time, but you're right. I mean
• 17:33
  Speaker 1: linking it back to business confidence, the key driver of
• 17:36
  Speaker 1: business investment will be that confidence number going back up.
• 17:39
  Speaker 1: So a deal with China, even if it is a
• 17:41
  Speaker 1: small deal, will be enough in our view to actually
• 17:44
  Speaker 1: get business confidence in its right. Bart Vynark, thank you
• 17:47
  Speaker 1: so much for being with us. Bart vyan Ark is
• 17:49
  Speaker 1: the chief economist at the conference board talking about the
• 17:52
  Speaker 1: slight decline that we saw in the leading consumer confidence figures.
• 18:13
  Speaker 1: Let's switch gears here and get take a look at
• 18:15
  Speaker 1: the business of pets. Ron Coglin is the CEO of Petco.
• 18:19
  Speaker 1: Petco was taken private I believe back in CBC Capital
• 18:23
  Speaker 1: Partners and some others. H Ron, thanks so much for
• 18:26
  Speaker 1: joining us. Love to just get an update on pet
• 18:29
  Speaker 1: Co and kind of where the market is right now
• 18:32
  Speaker 1: for you guys. Absolutely well, thanks for thanks for having me.
• 18:36
  Speaker 1: A year ago I joined you and uh we were
• 18:40
  Speaker 1: talking about taking a hundred million dollar bet on our
• 18:43
  Speaker 1: business by ticking out all products in our official ingredients.
• 18:48
  Speaker 1: And today I'm proud to say that not only have
• 18:51
  Speaker 1: we moved one point five million pounds of food with
• 18:54
  Speaker 1: artificial ingredients, but our business is gone from declining three
• 18:58
  Speaker 1: to four to up three to four percent. So we've
• 19:01
  Speaker 1: had this contention and what's good for the pet is
• 19:04
  Speaker 1: good for Petco and it's proven true. Ron are we
• 19:07
  Speaker 1: reaching peak pet where people are buying health food for
• 19:10
  Speaker 1: their dogs. One of the wonderful things about the pet
• 19:15
  Speaker 1: market is it's a growth market, so I would say
• 19:17
  Speaker 1: it's not peaking. Um more and more, there's an adage
• 19:21
  Speaker 1: pets used to be in the outdoors, then they were
• 19:24
  Speaker 1: in the backyard, and then they were in the house,
• 19:26
  Speaker 1: and now there in our bed. So more and more
• 19:28
  Speaker 1: folks are wanting to take care of the pets the
• 19:30
  Speaker 1: way they take care of themselves, and that includes avoiding
• 19:33
  Speaker 1: artificial ingredients. So interesting here, so give us a sense
• 19:37
  Speaker 1: of kind of the growth dynamic of kind of the
• 19:40
  Speaker 1: global pet food industry or the US pet food industry. Yeah,
• 19:44
  Speaker 1: so it's a six percent growth business. Um, you have
• 19:47
  Speaker 1: lastly one percent growth in the number of pets. But
• 19:51
  Speaker 1: in terms of how folks are taking care of their pets,
• 19:53
  Speaker 1: that type of food that they're serving pets, you know,
• 19:56
  Speaker 1: they're more and more they want to move away from,
• 19:59
  Speaker 1: you know, the old roys of the world and towards
• 20:02
  Speaker 1: the better for you foods. And a perfect example is
• 20:06
  Speaker 1: my my dog Yummy. He's a yellow lab he goes.
• 20:08
  Speaker 1: He's going on eleven years old, and before I joined
• 20:11
  Speaker 1: pet Go, I was feeding him the middle of the
• 20:14
  Speaker 1: road food and shame on me. And I switched him
• 20:17
  Speaker 1: to a productal just Food for Dogs, which is a
• 20:19
  Speaker 1: human grade food, um, fresh fish and sweet potatoes. He
• 20:23
  Speaker 1: medi lost fifteen towns and he's back to acting like
• 20:26
  Speaker 1: a puppy. I feel like this is a p s A.
• 20:29
  Speaker 1: You know, this is the reason why. Yeah, but I
• 20:32
  Speaker 1: wanted to talk about, you know, the growth market. There
• 20:34
  Speaker 1: has been a shift people having fewer kids having more dogs,
• 20:37
  Speaker 1: and I'm wondering, you know, how far along in an
• 20:39
  Speaker 1: evolution are way. Wasn't it something like people adopted more
• 20:43
  Speaker 1: pets than than had kids last year or something. I've
• 20:47
  Speaker 1: heard that statistic. I I know more about pet when
• 20:50
  Speaker 1: I do that kids At this point, my mine are
• 20:52
  Speaker 1: essentially the house. But um, I have heard that statistic.
• 20:55
  Speaker 1: You know in your first comment about p s A.
• 20:58
  Speaker 1: One of the things that we're moving the artificial did
• 21:00
  Speaker 1: was it regained the soul of pet go and really
• 21:03
  Speaker 1: unlocked our partner's passion for pets, and it was really
• 21:07
  Speaker 1: powerful for us. Um. But people are they're waiting longer
• 21:10
  Speaker 1: to have kids, and the pets are replacing some of
• 21:14
  Speaker 1: that that loving being in the house, and I think
• 21:18
  Speaker 1: it's good for for people and good for America. I
• 21:21
  Speaker 1: will just say this, given the fact that dogs are
• 21:24
  Speaker 1: more likely to be consistently loving than your children, perhaps
• 21:28
  Speaker 1: people are getting annoyed with getting talk back. So n
• 21:31
  Speaker 1: give us a sense of seeing my kids. Give us
• 21:34
  Speaker 1: a sense of the competitive environment. Is is the pet
• 21:36
  Speaker 1: food business one of those retail or consumer businesses that's
• 21:39
  Speaker 1: been disrupted by say technology, much like Amazon has done.
• 21:43
  Speaker 1: So give us a sense of the competitive environment. Yeah. Absolutely,
• 21:46
  Speaker 1: I'm not going to claim that that has an impacted
• 21:48
  Speaker 1: the pet industry. You have the Amazon factor, you have
• 21:51
  Speaker 1: the Chewy factor, and they've seen success in the pet
• 21:54
  Speaker 1: market UM and quite frankly, Petco had to go back
• 21:58
  Speaker 1: and retool, and that was the bad news. The good
• 22:00
  Speaker 1: news is we did and it's working so UM. In
• 22:03
  Speaker 1: the last year we've launched buy online, pick up in
• 22:07
  Speaker 1: stores and hugely successful. We reached over a million downloads
• 22:11
  Speaker 1: of our app. We have repeat delivery, and so our
• 22:16
  Speaker 1: online business is growing twenty plus right now. So what
• 22:20
  Speaker 1: was a was a threat is now turning into a
• 22:23
  Speaker 1: tell went for us. One thing that we've seen recently
• 22:27
  Speaker 1: is a bit of volatility in the speculative grade credit market,
• 22:32
  Speaker 1: and I'm just wondering how much money you need to
• 22:35
  Speaker 1: raise at this point, given the fact that you have
• 22:37
  Speaker 1: a BU to your credit rating and things are getting
• 22:41
  Speaker 1: a little bit more challenging for some companies. Yeah, we
• 22:44
  Speaker 1: we don't need UH. We don't need to raise money
• 22:47
  Speaker 1: and we have access to capital as we need it.
• 22:50
  Speaker 1: So from that standpoint, we're solid. We have two great
• 22:53
  Speaker 1: private equity primary partners in CBC Partners and CPP. They
• 22:58
  Speaker 1: can't pension fund UH, and we're back to growth on
• 23:02
  Speaker 1: the top line, and we're looking forward to sharing a
• 23:05
  Speaker 1: result on the bottom line with our lenders in a
• 23:07
  Speaker 1: few weeks. So we're good on that front, uh, and
• 23:12
  Speaker 1: we feel good about our execution and our financial health.
• 23:15
  Speaker 1: Where's the biggest opportunity for growth for pet Go. I'd
• 23:20
  Speaker 1: say two things. One is digital, continuing to drive our
• 23:23
  Speaker 1: digital business, and the second is we're shifting to services
• 23:27
  Speaker 1: and those are services that those digital players don't have.
• 23:30
  Speaker 1: So we've taken our grooming business from a declining to
• 23:35
  Speaker 1: planning near double digit business, our training businesses and growth,
• 23:39
  Speaker 1: and we are driving probably the fastest vet network build
• 23:44
  Speaker 1: out in history. And what's significant about that is too
• 23:48
  Speaker 1: for the benefit of the pets. We're talking about affordable
• 23:50
  Speaker 1: vet care. A lot of pets don't get the vet
• 23:52
  Speaker 1: care they need because of affordability. And the second thing
• 23:55
  Speaker 1: is where we put a vet, we get the bet income,
• 23:58
  Speaker 1: but we also get a UM four to seven point
• 24:01
  Speaker 1: lift in our center sorece sales. So it's good for
• 24:04
  Speaker 1: the pet and it's good for our business. Ron Coglin,
• 24:07
  Speaker 1: thank you so much for being with us. Ron Coglin
• 24:09
  Speaker 1: is Petco chief executive officer. Talking about a push toward
• 24:13
  Speaker 1: more natural ingredients for people's pet Thanks for listening to
• 24:17
  Speaker 1: the Bloomberg P and L podcast. You can subscribe and
• 24:19
  Speaker 1: listen to interviews at Apple Podcasts or whatever podcast platform
• 24:22
  Speaker 1: you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
• 24:25
  Speaker 1: I'm Lisa abram Woyds. I'm on Twitter at Lisa A.
• 24:28
  Speaker 1: Bram wits one. Before the podcast, you can always catch
• 24:30
  Speaker 1: us worldwide on Bloomberg Radio