Latest / Bloomberg Intelligence / Debt Ceiling, DHL, TikTok, Commodities, and Ukraine (Podcast)

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Debt Ceiling, DHL, TikTok, Commodities, and Ukraine (Podcast) · Bloomberg Intelligence

• 0:00
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
• 0:04
  Speaker 1: my co host Matt Miller.
• 0:05
  Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
• 0:09
  Speaker 2: and Bloomberg experts, along with essential market moving news.
• 0:14
  Speaker 1: Find the Bloomberg Markets Podcast on Apple Podcasts or wherever
• 0:17
  Speaker 1: you listen to podcasts, and at Bloomberg dot com slash podcast.
• 0:20
  Speaker 1: All right, let's check in on this federal reserve. You know,
• 0:24
  Speaker 1: I mean I hate to talk to Arad Jersey because
• 0:26
  Speaker 1: then he just want to talk soccer, soccer, soccer. You
• 0:28
  Speaker 1: want to talk to Manchester United. You know, they just
• 0:30
  Speaker 1: won the Premiership, but we're going to try to focus
• 0:33
  Speaker 1: them back a little bit on rates here. So I
• 0:36
  Speaker 1: we're getting a lot of ego data this week. I
• 0:39
  Speaker 1: don't know how you're feeling about the debt ceiling. Let's
• 0:41
  Speaker 1: assume it kind of gets done with that backdrop, How
• 0:45
  Speaker 1: do you think your your feederal reserve is feeling these days?
• 0:47
  Speaker 3: Well, first, let's before you get a lot of angry
• 0:50
  Speaker 3: tweets and emails. If it's Manchester City.
• 0:52
  Speaker 1: The Manchester City, okay, thank you.
• 0:54
  Speaker 3: Manchester United is fighting for a Champions League place right now?
• 0:57
  Speaker 1: Okay, But you're not a fan of either Manchester.
• 1:00
  Speaker 3: Team, right, So my son is actually a very big
• 1:03
  Speaker 3: United supporter, but yeah, I'm not a fan of city
• 1:07
  Speaker 3: at all.
• 1:08
  Speaker 1: And what's your team?
• 1:09
  Speaker 3: By the way, aston Villa?
• 1:11
  Speaker 1: Why would it be aston Villa? Where'd you pick that
• 1:13
  Speaker 1: one up?
• 1:14
  Speaker 3: I I when I did a postgraduate degree at the
• 1:17
  Speaker 3: University of Birmingham, which is very close to aston Villa.
• 1:20
  Speaker 3: So a bunch of Villa matches.
• 1:21
  Speaker 1: All right, there you go. Everybody's got to see.
• 1:24
  Speaker 3: Yeah, so let's assume that the dead ceiling gets raised,
• 1:27
  Speaker 3: because they probably will raise it, and if they don't,
• 1:29
  Speaker 3: there's so many disaster scenarios that could potentially come around
• 1:33
  Speaker 3: that that, you know, we'd rather not kind of think
• 1:35
  Speaker 3: about it at the moment. It's we've spent way too
• 1:37
  Speaker 3: much gray matter on thinking about it. I think that
• 1:41
  Speaker 3: you know that the Federal Reserve is contending with kind
• 1:43
  Speaker 3: of two competing forces at the moment. So one is
• 1:46
  Speaker 3: inflation coming down as quickly as they want. You know,
• 1:48
  Speaker 3: some of the data that we've seen, the the jobs
• 1:52
  Speaker 3: data continues to deteriorate a little bit, but we're still
• 1:55
  Speaker 3: creating a lot of jobs and there's still very tight
• 1:57
  Speaker 3: labor markets. But then on the other side, you know
• 2:00
  Speaker 3: that I think the FED will be a little bit
• 2:02
  Speaker 3: reluctant to hike because they're worried about what might happen
• 2:04
  Speaker 3: to some of the banking sectors. Right, so we obviously
• 2:08
  Speaker 3: all know what happened back in March, and I don't
• 2:11
  Speaker 3: think that the FED Reserve wants to be the impetus
• 2:14
  Speaker 3: for additional bank failures and bank runs, especially since they've
• 2:17
  Speaker 3: already raised interest rates five hundred basis points. So our
• 2:20
  Speaker 3: base case remains that the Fed is going to be
• 2:22
  Speaker 3: on hold that they might job try to talk the
• 2:26
  Speaker 3: market out of pricing for interest rate cuts later this year.
• 2:31
  Speaker 3: But I think that that the bulk of the Committee
• 2:34
  Speaker 3: is not going to agree with James Bullard saying that
• 2:36
  Speaker 3: we're going to hike interest rates another twenty five or
• 2:38
  Speaker 3: fifty basis points. I think that most people on the
• 2:41
  Speaker 3: Committee want to take a little bit of a wait
• 2:43
  Speaker 3: and see attitude from now.
• 2:45
  Speaker 4: Hey, Ira, I'm looking at the four week Treasury bills
• 2:47
  Speaker 4: and how they're hovering around five point four percent, So
• 2:50
  Speaker 4: that would basically bring their rise since the beginning of
• 2:52
  Speaker 4: May to more than sixty basis points. I'm wondering what
• 2:55
  Speaker 4: kind of movement are you expecting to see Indy bond
• 2:58
  Speaker 4: market on which hopefully be a potential deal soon here.
• 3:03
  Speaker 3: Yeah, so I think that some of those bills that
• 3:05
  Speaker 3: are trading super cheap right now will we'll come back
• 3:08
  Speaker 3: into line with kind of the market expectation. So the
• 3:14
  Speaker 3: thing to look at for, you know, the real market
• 3:17
  Speaker 3: expectations for what the Fed is going to do in June,
• 3:19
  Speaker 3: would be looking at the overnight interest rate swap market.
• 3:21
  Speaker 3: So these are short term derivative instruments that are based
• 3:24
  Speaker 3: on the Federal Funds effective rate. So so that that
• 3:28
  Speaker 3: will be a much better gauge than looking at treasury bills,
• 3:31
  Speaker 3: because treasury bills right now, even the one month treasury bills,
• 3:34
  Speaker 3: are being very skewed by the debt ceiling ancs that
• 3:36
  Speaker 3: are that are going on. So we are pricing some
• 3:40
  Speaker 3: probability of an interest rate hike by the Fed at
• 3:43
  Speaker 3: the June meeting. And when we look at these overnight
• 3:45
  Speaker 3: index swaps for the next Fed meeting, what we wind
• 3:50
  Speaker 3: up seeing is that we are pricing for you know,
• 3:53
  Speaker 3: more or less a thirty thirty five percent chance that
• 3:56
  Speaker 3: the Federal Reserve does another twenty five basis point interest increase. Now,
• 4:00
  Speaker 3: I think as we get closer to that and as
• 4:02
  Speaker 3: we get more data. Uh So, we get the pc
• 4:05
  Speaker 3: data this week for the month of April, and that's
• 4:09
  Speaker 3: that's the measure that that the Federal Reserve really likes
• 4:12
  Speaker 3: and is their preferred gauge of inflation. You know, if
• 4:16
  Speaker 3: that comes out as expected, then I think that you
• 4:18
  Speaker 3: wind up probably with the with uh that price that
• 4:23
  Speaker 3: pike being priced out of the market at least at
• 4:26
  Speaker 3: least in the near term until we get the CPI report,
• 4:28
  Speaker 3: which we get very soon before the June meeting.
• 4:32
  Speaker 1: So again you mentioned on a Friday, get the PCE data,
• 4:36
  Speaker 1: and as you mentioned, the core deflator, which is kind
• 4:39
  Speaker 1: of the preferred metric for the Fed month on month
• 4:42
  Speaker 1: of consensus is zero point three percent. That's even with
• 4:45
  Speaker 1: last month. On an annualized basis, that's four point six percent,
• 4:49
  Speaker 1: even with with last month. Those numbers just that I
• 4:52
  Speaker 1: just quoted, they feel sticky to me, number one, and
• 4:57
  Speaker 1: but number two, I guess that four point six is
• 4:59
  Speaker 1: that the number they want to see Closer to two percent?
• 5:02
  Speaker 3: Yeah, it is, and it's not getting there very quickly,
• 5:05
  Speaker 3: which is the reason why I think that the the
• 5:08
  Speaker 3: you know, J. Powell mentioned this even in his little
• 5:12
  Speaker 3: round table discussion last week when he was on with
• 5:14
  Speaker 3: former chair Ben Bernanki that the Federal Reserve is not
• 5:19
  Speaker 3: going to be cutting interest rates anytime soon, and especially
• 5:24
  Speaker 3: when you continue to get kind of zero point three
• 5:26
  Speaker 3: percent core core deflator or headline deflator measures. So think
• 5:32
  Speaker 3: about what zero point three is, Paul, because if you
• 5:34
  Speaker 3: annualize that, then you're talking about three point nine percent inflation.
• 5:38
  Speaker 5: Right.
• 5:38
  Speaker 3: It's a pretty simple calculation, right, or three point six
• 5:41
  Speaker 3: Excuse me, I can't do math today. Three point six
• 5:43
  Speaker 3: percent inflation, and three point six percent is still well
• 5:46
  Speaker 3: above the Fed's two percent measure. You know, I think
• 5:50
  Speaker 3: the Feds kind of box themselves into a corner a
• 5:52
  Speaker 3: little bit because focusing in on two percent, we want
• 5:55
  Speaker 3: to get inflation back to two percent. Paul. You and
• 5:58
  Speaker 3: I grew up in this industry back and then in
• 6:00
  Speaker 3: the eighties and nineties when we had inflation that was
• 6:02
  Speaker 3: above three percent, but wages were growing above three percent,
• 6:05
  Speaker 3: and no one was you know, consumer confidence was reasonably good.
• 6:09
  Speaker 3: People weren't unhappy about their employment situation because jobs were
• 6:13
  Speaker 3: reasonably plentiful and people were getting four percent pay raises
• 6:16
  Speaker 3: every year when inflation was three percent, so that wasn't
• 6:20
  Speaker 3: the worst thing in the world. And I think if
• 6:22
  Speaker 3: we fall back into an environment like that, it's going
• 6:24
  Speaker 3: to be difficult at this point for the FED to
• 6:26
  Speaker 3: pivot back to saying, well, maybe three percents not so
• 6:30
  Speaker 3: bad for inflation, right. And I think that that's the
• 6:34
  Speaker 3: challenge with having these inflation targets, like a lot of
• 6:37
  Speaker 3: central banks have, is that moving away from them ends
• 6:40
  Speaker 3: up being disrupted to the markets and confusing from a
• 6:43
  Speaker 3: communications perspective.
• 6:44
  Speaker 4: And Ira, you're bringing up the CPI report, I was
• 6:47
  Speaker 4: looking at the schedule. It's actually coming out on June thirteenth,
• 6:49
  Speaker 4: so that would be day one of the fed's next meeting,
• 6:52
  Speaker 4: and the decision is on June fourteenth. I was curious
• 6:55
  Speaker 4: what we do hear from Obviously, as you know, tons
• 6:58
  Speaker 4: of Feds speak this week. We just heard from James
• 7:00
  Speaker 4: Bullard yesterday talking about trying to get in potentially two
• 7:03
  Speaker 4: more rate hikes because of the labor market being strong.
• 7:06
  Speaker 4: How much whenever we do have FED speak like that,
• 7:08
  Speaker 4: do you see those types of potential changes there in
• 7:10
  Speaker 4: the bond market or even just pricing in those expectations
• 7:13
  Speaker 4: for potentially another rate cut or rate rise rather at
• 7:16
  Speaker 4: the next meeting.
• 7:17
  Speaker 5: Yeah.
• 7:17
  Speaker 3: Well, I think that's one reason why you saw two
• 7:19
  Speaker 3: year yields move, and you certainly saw the overnight index
• 7:22
  Speaker 3: swop market and some of the derivatives market move a
• 7:24
  Speaker 3: little bit after after President Bullard spoke yesterday. You'll still
• 7:28
  Speaker 3: see volatility around that. And one people have focused very
• 7:33
  Speaker 3: much on James Bullard's cycle in particular because he was
• 7:36
  Speaker 3: pretty early in being one of the more hawkish members
• 7:39
  Speaker 3: that that basically, you know, was kind of the southsayer
• 7:43
  Speaker 3: for for the FED hiking and inflation remaining high and sticky.
• 7:49
  Speaker 3: You know, I'm not sure that his colleagues on the
• 7:52
  Speaker 3: FED agree with him. So, you know, as we hear
• 7:55
  Speaker 3: from other speakers, you know, maybe we you know, hear
• 7:58
  Speaker 3: from a couple of governors for example, this week, and
• 8:00
  Speaker 3: if they're they found a little bit more dubbish than Billard,
• 8:03
  Speaker 3: then maybe we'll, you know, that will be the impetus
• 8:05
  Speaker 3: for us to take some of those hikes out of
• 8:07
  Speaker 3: the market.
• 8:08
  Speaker 1: All right, Ira, thanks so much for joining us. As always,
• 8:10
  Speaker 1: Ira Jersey, chief US interest rate strategists for Bloomberg Intelligence.
• 8:14
  Speaker 1: He's also the resident Aston Villa uber fan, so we
• 8:18
  Speaker 1: appreciate getting some of his thoughts again fed front and
• 8:21
  Speaker 1: center as usual.
• 8:24
  Speaker 5: You're listening to the team Ken's are Live program Bloomberg
• 8:27
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg dot Com,
• 8:31
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• 8:34
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• 8:38
  Speaker 1: Jess, we are so fortunate. I think here at Bloomberg
• 8:41
  Speaker 1: we've got, you know, seventeen hundred reporters and bi analysts
• 8:46
  Speaker 1: around the world that are experts at what they do,
• 8:49
  Speaker 1: and for the most part, they're very friendly. And if
• 8:52
  Speaker 1: you call them up and say, hey, can you help
• 8:53
  Speaker 1: us out on Bloomberg Radio, more times than not they
• 8:56
  Speaker 1: say yes. And that is just a treat for us
• 8:58
  Speaker 1: and for our audience. And boy, this round table takes
• 9:01
  Speaker 1: the cake because we want to talk about this debt ceiling.
• 9:03
  Speaker 1: I'm going to call a dilemma. I don't know what's
• 9:04
  Speaker 1: going on at there. I assume it's going to get them,
• 9:06
  Speaker 1: but what do I know. But a couple of our
• 9:08
  Speaker 1: guests are really smart and they can help us shine
• 9:10
  Speaker 1: some light on it. Liz McCormick, Chief correspondent for Global
• 9:13
  Speaker 1: Macro markets with Bloomberg News. She joins us as well
• 9:16
  Speaker 1: as Cameron Christ macro strategists with Bloomberg News as well.
• 9:19
  Speaker 1: So we get a couple smart minds here. They've got
• 9:21
  Speaker 1: some experience, they've got some perspective. Liz, let's start with
• 9:23
  Speaker 1: you. You know, I'm just an equity guy, and I don't
• 9:26
  Speaker 1: see I got my equity indexes up this year. It
• 9:29
  Speaker 1: doesn't seem like the equity market's too worried about it.
• 9:31
  Speaker 1: If I were to look deeply in the bond market
• 9:33
  Speaker 1: when I see some tension, some growing tension in the
• 9:36
  Speaker 1: bond market about a potential debt issue.
• 9:40
  Speaker 6: Yeah, exactly. There's like two worlds going on. So it
• 9:44
  Speaker 6: seems right between stocks and the fixed income market. But yeah,
• 9:47
  Speaker 6: and that's kind of the fixed income market's job front
• 9:50
  Speaker 6: and center early on to do a read on this
• 9:52
  Speaker 6: debt ceiling issue, and you're seeing it. You're seeing treasury
• 9:55
  Speaker 6: bills that mature around now. Janet Yelling was out I
• 9:59
  Speaker 6: believe it was yesterday, just yesterday, with a new letter
• 10:02
  Speaker 6: to Congress saying she thinks there's a lot of risk
• 10:05
  Speaker 6: they could run out of capacity to pay all the
• 10:07
  Speaker 6: bills as early as June one, she's you know, that's
• 10:10
  Speaker 6: highly likely. So the treasury market, there's you know, kind
• 10:13
  Speaker 6: of a buffer range maybe through early June. Treasury investors
• 10:17
  Speaker 6: are kind of weary of buying treasury bills that mature
• 10:20
  Speaker 6: around that time. So you're seeing those bills with very
• 10:23
  Speaker 6: high rates, well over five percent, and those rates are
• 10:27
  Speaker 6: higher than those with longer maturities, which usually have a
• 10:30
  Speaker 6: higher rate. So people are avoiding that. You're seeing credit
• 10:33
  Speaker 6: to caul swamps, their costs go up as people buy
• 10:37
  Speaker 6: some insurance, and just a level of angst in the marketplace.
• 10:40
  Speaker 6: But yeah, I mean the stock market. There's a lot
• 10:42
  Speaker 6: of people say until the stock market really kind of
• 10:45
  Speaker 6: takes it hard, maybe politicians won't, you know, step off
• 10:48
  Speaker 6: the face of getting a deal. But that's another topic.
• 10:50
  Speaker 4: I guess, you know, Cameron, I wanted to bring you
• 10:53
  Speaker 4: to this conversation. Who we call Macroman at Bloomberg so
• 10:56
  Speaker 4: is so exciting. I know, you just put out a
• 10:58
  Speaker 4: column that the head line is where the yield curve
• 11:01
  Speaker 4: thinks the neutral rate may be. What do you find here?
• 11:07
  Speaker 7: Yeah, I mean, unsurprisingly it's lower than where we are.
• 11:12
  Speaker 7: I mean, listen, taking a step back, the whole idea
• 11:15
  Speaker 7: of neutrality is like an economist dream because they get
• 11:19
  Speaker 7: to make very complicated models with lots of Greek letters.
• 11:26
  Speaker 7: But what we also find is that they tend to
• 11:30
  Speaker 7: be revised a lot, and they're not necessarily terribly accurate.
• 11:33
  Speaker 7: So my approach was just, well, let's just look at
• 11:36
  Speaker 7: what the old curve says, because we know that when
• 11:39
  Speaker 7: the yield curve is very steep, it's basically saying that
• 11:41
  Speaker 7: rates are easy, and when the yeld curve is very inverted,
• 11:44
  Speaker 7: it's saying that rates are restrictive, and obviously the curve
• 11:47
  Speaker 7: is very restrictive. The curve is very inverted at the moment,
• 11:50
  Speaker 7: saying that rates are restrictive, and the best I can
• 11:54
  Speaker 7: tease out, it's saying that in the US at least,
• 11:56
  Speaker 7: the neutral level of rates is about three point six
• 11:59
  Speaker 7: percent at the moment.
• 12:01
  Speaker 1: So Cameron, for your perspective, I don't know, are you
• 12:05
  Speaker 1: gaming out at all yet? Have you pre written a
• 12:07
  Speaker 1: column about we just defaulted on our debt? I mean,
• 12:10
  Speaker 1: how are you thinking about it?
• 12:12
  Speaker 6: No?
• 12:12
  Speaker 7: I haven't because I hope it doesn't come to that.
• 12:14
  Speaker 7: I mean, I mean honest with you, I feel like
• 12:17
  Speaker 7: I'm at the circus just watching a bunch of clowns.
• 12:20
  Speaker 7: I wish I had a bag of peanuts I could throw,
• 12:22
  Speaker 7: you know, I could throw at them. I think the
• 12:24
  Speaker 7: assumption is pretty prevalent in the market that when push
• 12:29
  Speaker 7: comes to shove, nobody wants their name on a default,
• 12:34
  Speaker 7: and that they at the very least they will come
• 12:37
  Speaker 7: to some agreement to kick the can down the road
• 12:40
  Speaker 7: a few months to allow for more robust negotiations. I
• 12:46
  Speaker 7: suspect that the Republicans would like the issue to become
• 12:49
  Speaker 7: front and center again early next year with the presidential campaign,
• 12:54
  Speaker 7: and I'm equally sure that the White House would prefer
• 12:58
  Speaker 7: that not to be the case. So there's still you know,
• 13:02
  Speaker 7: there's still some political considerations there. But you know, nobody
• 13:07
  Speaker 7: comes out with their reputation enhanced by a government default,
• 13:12
  Speaker 7: and I think we have to operate on the on
• 13:14
  Speaker 7: the notion, at the end of the day, the sole goal,
• 13:16
  Speaker 7: or the primary goal of every politician is to be
• 13:18
  Speaker 7: re elected.
• 13:19
  Speaker 4: Liz, I know you've been looking at how the US
• 13:21
  Speaker 4: Treasury thirty year yield hit four percent for the first
• 13:24
  Speaker 4: time since March. Whenever you're speaking with your sources, what
• 13:27
  Speaker 4: are they thinking as far as what we could see
• 13:30
  Speaker 4: happen in the bond market once there hopefully would be
• 13:34
  Speaker 4: a deal coming soon.
• 13:37
  Speaker 6: Well, I think if there's a deal, and I think
• 13:38
  Speaker 6: Cameron is right, there's a lot of us who are like,
• 13:41
  Speaker 6: can we turn this movie off? We've seen it before,
• 13:43
  Speaker 6: can we just get it, get the deal. We're tired
• 13:46
  Speaker 6: of it. Don't tell my boss that now. I'm just kidding,
• 13:49
  Speaker 6: but I think, yeah, I think if we get a deal,
• 13:54
  Speaker 6: the bond market reverts its focus, which hasn't forgotten, but
• 13:57
  Speaker 6: it's all about the economy and the and like you
• 14:01
  Speaker 6: guys were talking earlier with IRA, we did have some
• 14:04
  Speaker 6: hawker speakers yesterday that doesn't seem to jive with what
• 14:08
  Speaker 6: Chairman Palell said, who kind of seemed to lay the
• 14:11
  Speaker 6: case for a pause in June. So I think, you know,
• 14:14
  Speaker 6: whereas maybe the stocks, even though they haven't gotten beaten
• 14:17
  Speaker 6: up too much, there's folks that say they see immediate
• 14:19
  Speaker 6: relief rally if there's a dead ceiling deal, I think
• 14:22
  Speaker 6: bond yields can creep higher because there has been no
• 14:25
  Speaker 6: kind of indications. In fact, some of the easing that
• 14:28
  Speaker 6: was priced in the second half of the year from
• 14:30
  Speaker 6: the swats traders has kind of paired back a little.
• 14:33
  Speaker 6: So I think the market needs to see some you know,
• 14:35
  Speaker 6: strong information signaling a recession is really coming soon, or
• 14:39
  Speaker 6: that the Fed is not only ready to for sure pause,
• 14:43
  Speaker 6: but pivot, which they clearly have not indicated. There's a
• 14:46
  Speaker 6: lot of people who think there could be some move
• 14:48
  Speaker 6: higher in rates. So, like you said, Jess, we saw
• 14:51
  Speaker 6: the thirty year ago about four percent. The whole curve
• 14:54
  Speaker 6: is have greats higher today, with the short end even
• 14:57
  Speaker 6: higher than the long end. So I think, yeah, that's
• 15:00
  Speaker 6: kind of filtering back into the system. What happens next?
• 15:04
  Speaker 5: Right?
• 15:04
  Speaker 1: So, Lis you mentioned earlier credit default swaps, and I
• 15:06
  Speaker 1: think all of us, you know, learned a lot about
• 15:09
  Speaker 1: credit the fault swaps back in a great financial crisis
• 15:12
  Speaker 1: when we're looking at all these banks and all that.
• 15:15
  Speaker 1: So you're telling us there are credit default swaps on
• 15:17
  Speaker 1: the US government, and if so, what are they telling
• 15:19
  Speaker 1: us today?
• 15:21
  Speaker 6: Yeah, it's it's kind of crazy, right, And let's just
• 15:24
  Speaker 6: say which I know Cameron would I would think agree
• 15:27
  Speaker 6: with me. It's a very thinly traded market. There's always
• 15:30
  Speaker 6: kind of a lot of people who are suspect. Let's
• 15:33
  Speaker 6: not read too much into this because you know, it's
• 15:35
  Speaker 6: not a huge market, but the cost to buy them
• 15:39
  Speaker 6: has gone up the very short maturities like a year,
• 15:42
  Speaker 6: which at least shows you some broad signal that there,
• 15:45
  Speaker 6: you know, people are a little bit worried or doing
• 15:47
  Speaker 6: some hedging that there could be a default. But by
• 15:51
  Speaker 6: all means that it's a more actively traded market and
• 15:53
  Speaker 6: emerging markets where unfortunately defaults have in some countries been commonplace.
• 15:59
  Speaker 6: But yeah, I mean it's definitely something we look at.
• 16:01
  Speaker 6: If you look at Alex Harrison nineteen, who does this
• 16:03
  Speaker 6: great little debt ceiling tracker, you know she has that
• 16:07
  Speaker 6: in there. It's just important to kind of keep on
• 16:09
  Speaker 6: your radar screen of what's going on.
• 16:11
  Speaker 4: Yeah, Cameron, I know you've been keeping a close eye
• 16:14
  Speaker 4: on real yields. What are they telling us right now, Well.
• 16:19
  Speaker 7: They're telling us that that if you are long gold,
• 16:25
  Speaker 7: or if you are long stocks, maybe you want to
• 16:27
  Speaker 7: be a little worried because they've been they've been taking
• 16:29
  Speaker 7: higher two. Your real yields are basically at their highs
• 16:32
  Speaker 7: of the entire cycles. So this sort of rebound in
• 16:36
  Speaker 7: interest rates that we've seen over the last couple of
• 16:41
  Speaker 7: weeks has not been the market pricing and more inflation
• 16:44
  Speaker 7: moving forward, essentially the market pricing and tighter policy settings
• 16:48
  Speaker 7: or tighter effective policy settings moving forward. And that is
• 16:52
  Speaker 7: not a particularly positive one for assets that are dependent
• 16:57
  Speaker 7: on kind of free money or the ample liquidity and
• 17:02
  Speaker 7: there we were thinking of gold, or we're thinking of
• 17:04
  Speaker 7: the sort of infinite maturity or infinite durationtech dot complex.
• 17:09
  Speaker 7: It has done so well this year.
• 17:11
  Speaker 1: Hey, Keim, just about thirty seconds here. Are you surprised
• 17:13
  Speaker 1: that the nasdak's up twenty one percent, the NASDAK one
• 17:16
  Speaker 1: hunters up twenty six percent, the SMP's up nine percent?
• 17:20
  Speaker 1: You're surprised that these moves in the equity.
• 17:22
  Speaker 7: Markets over the course of the year. Yeah, I mean, yes,
• 17:26
  Speaker 7: very much.
• 17:26
  Speaker 6: So.
• 17:27
  Speaker 7: I mean, to some extent, you can sort of post
• 17:30
  Speaker 7: hawk explain it via the move in interest rates, but
• 17:33
  Speaker 7: it looks to me a lot like equity investors trying
• 17:37
  Speaker 7: to convince themselves that they get all the benefit of
• 17:39
  Speaker 7: low rates without any of the pain that causes the
• 17:42
  Speaker 7: said to.
• 17:43
  Speaker 1: Cut All right, guys, really appreciate getting some time from
• 17:45
  Speaker 1: both of you. Cameron christ Macro Strategists, Bloomberg News End.
• 17:49
  Speaker 1: Liz McCormick, chief correspondent covering the global macro markets. Two
• 17:53
  Speaker 1: seasoned reporters and observers of these markets, and they are
• 17:57
  Speaker 1: both graduates. So two of my favorite institutes of higher learning.
• 18:01
  Speaker 1: Liz McCormick of the Rutgers University, the State University of
• 18:05
  Speaker 1: New Jersey, and Camera Christ, a little school down in Durmoruth,
• 18:08
  Speaker 1: Carolina known as Duke.
• 18:09
  Speaker 5: You're listening to the tape Kent's are live program Bloomberg
• 18:12
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 18:16
  Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 18:19
  Speaker 5: You can also listen live on Amazon Alexa from our
• 18:22
  Speaker 5: flagship New York station. Just say Alexa, play Bloomberg eleven thirty.
• 18:28
  Speaker 1: All right, let's talk delivering stuff boxes. Now when you
• 18:31
  Speaker 1: get home tonight, just how many boxes are gonna be
• 18:33
  Speaker 1: in front of your door? Probably?
• 18:34
  Speaker 4: I mean, my birthday was last week, so I have
• 18:37
  Speaker 4: a lot.
• 18:37
  Speaker 8: Of people been sending me some things, so I hope
• 18:40
  Speaker 8: that there are more boxes waiting for me.
• 18:42
  Speaker 1: You get, It's just it's unbelievable how the world's changed here.
• 18:45
  Speaker 1: So let's break it all down with Mike Para. He's
• 18:47
  Speaker 1: the CEO for the Americas at DHL Express joining us
• 18:50
  Speaker 1: live here in our Bloomberg Interactive Broker studio. So, Mike,
• 18:53
  Speaker 1: thanks so much for joining us here. Appreciate you coming.
• 18:55
  Speaker 1: And you got a whole bunch of notes with you,
• 18:57
  Speaker 1: but this is a note free studio. See, I got nothing.
• 18:59
  Speaker 1: I just kind of for four of it talk to
• 19:02
  Speaker 1: us about your business here. I'm gonna ask you to
• 19:05
  Speaker 1: go back and tell us, you know, a minute or
• 19:07
  Speaker 1: so what the pandemic was like for you guys, and
• 19:09
  Speaker 1: then we'll go to kind of where you are today.
• 19:11
  Speaker 9: Yeah, So, first of all, thank you for having me
• 19:13
  Speaker 9: and thank you for having us. You know, the pandemic
• 19:15
  Speaker 9: for us was a blessing and obviously it was a curse.
• 19:19
  Speaker 9: First of all, on the curse side, we lost forty
• 19:21
  Speaker 9: two employees here in the Americas, and that was the
• 19:24
  Speaker 9: curse side. That was the difficult side for us. The
• 19:27
  Speaker 9: blessing side of it was that workers absolutely.
• 19:30
  Speaker 1: Yeah.
• 19:31
  Speaker 9: The blessing side was that our business just blossomed and
• 19:35
  Speaker 9: blossomed in many different ways. Number one is we were
• 19:37
  Speaker 9: able to successfully deliver over two point one billion vaccines
• 19:43
  Speaker 9: across the world. Many of the countries that got their
• 19:46
  Speaker 9: vaccines were delivered via DHL, so that was a blessing.
• 19:50
  Speaker 9: And then we had a growth and explosion over a
• 19:53
  Speaker 9: two year period of time that we had never seen
• 19:55
  Speaker 9: in the you know the history of our organization. So
• 19:59
  Speaker 9: that's what I would say. The ability to help to
• 20:00
  Speaker 9: connect people and improve lives was the blessing. To lose
• 20:04
  Speaker 9: colleagues across the world was painful.
• 20:07
  Speaker 4: And when you're looking at the market at this point,
• 20:10
  Speaker 4: what is it telling you is through your business because
• 20:13
  Speaker 4: I would imagine this is a big key as far
• 20:15
  Speaker 4: as what things are looking, not just nationally, but globally
• 20:18
  Speaker 4: as well.
• 20:19
  Speaker 9: Yeah, oh look the market right now is interesting. Just
• 20:22
  Speaker 9: coming off an interview and discussing this, you know, what
• 20:25
  Speaker 9: I would say from a macro level is, you know,
• 20:28
  Speaker 9: we went through this whole fear of running out what
• 20:31
  Speaker 9: I call four to roho and now to you know,
• 20:34
  Speaker 9: to access inventory and where you have supply is greater
• 20:38
  Speaker 9: than the demand that is out there at the moment.
• 20:40
  Speaker 9: But we are starting to see some signs of life.
• 20:42
  Speaker 9: We're starting to see some tailwinds out of China and
• 20:45
  Speaker 9: out of Hong Kong, so we're starting to see those
• 20:47
  Speaker 9: numbers grow.
• 20:48
  Speaker 4: Now.
• 20:48
  Speaker 9: Remember the baseline of this also is coming off the
• 20:51
  Speaker 9: fact that last year they were in a lockdown from
• 20:54
  Speaker 9: that perspective. So we're starting to see some momentum. We're
• 20:57
  Speaker 9: starting to add some additional capacit out of China and
• 21:01
  Speaker 9: out of Hong Kong into the United States predominantly. So
• 21:06
  Speaker 9: what we do know is that we're a bit more
• 21:08
  Speaker 9: optimistic than what everybody is saying in regards to the
• 21:12
  Speaker 9: US consumer, and we think we're going to you know,
• 21:16
  Speaker 9: we're getting ready for what will be a good fourth quarter.
• 21:19
  Speaker 9: So some people are saying the bounce back will come
• 21:21
  Speaker 9: back in the third quarter. You know, my thoughts, it's
• 21:23
  Speaker 9: going to be much more in the fourth quarter. I
• 21:25
  Speaker 9: think we're going to see more experiences happen, people taking
• 21:28
  Speaker 9: more vacation. The airlines are ramping up for that for June, July,
• 21:32
  Speaker 9: and August, and as a result of that, that's why
• 21:35
  Speaker 9: I'm saying it's going to be much more fourth quarter related.
• 21:38
  Speaker 1: Talk to us about you know, one of the key
• 21:40
  Speaker 1: components of your cost structure your business is your people. Yea,
• 21:44
  Speaker 1: labor Do you have enough people, do you have them employed?
• 21:48
  Speaker 1: Is it hard to get them? Do you have to
• 21:50
  Speaker 1: pay them more? Talk to us about your labor force.
• 21:53
  Speaker 9: Thank you, Thank you for asking that question. In regards
• 21:55
  Speaker 9: do we have enough people, yes, do we need to
• 21:57
  Speaker 9: pay them more? We just put out the law. Our
• 22:00
  Speaker 9: just pay increase in the history of the company was
• 22:03
  Speaker 9: this year in twenty twenty three, and rightfully so, based
• 22:06
  Speaker 9: on inflation and cost of living in general that's going on.
• 22:09
  Speaker 9: And by the way, this was not just here in
• 22:10
  Speaker 9: the United States but also globally from that perspective, so
• 22:14
  Speaker 9: less concerned about that. In regards to recruitment and recruitment efforts.
• 22:18
  Speaker 9: We are replacing folks as we have either attrition or promotions.
• 22:24
  Speaker 9: We are replacing roles. But we are constantly looking at
• 22:28
  Speaker 9: our efficiencies and how we can optimize our network, not
• 22:31
  Speaker 9: only in the air but also on the ground.
• 22:34
  Speaker 4: What are your thoughts on geopolitics right now? And is
• 22:37
  Speaker 4: the debt sealing a concern for you?
• 22:38
  Speaker 9: You know, somebody asked me as well that question on
• 22:40
  Speaker 9: the debt ceiling. We're not spending a lot of time
• 22:44
  Speaker 9: because that's going to work its way out as it
• 22:46
  Speaker 9: has historically. Now some might say, well, Mike, everybody says that,
• 22:50
  Speaker 9: but in all reality, I think it's just much more
• 22:52
  Speaker 9: of a timetable of when it's going to get negotiated
• 22:55
  Speaker 9: and worked out. I think there's more fear associated with
• 22:58
  Speaker 9: the whole debt ceiling and are we going to out
• 23:00
  Speaker 9: of time? And are you know what's going to happen
• 23:02
  Speaker 9: to the US economy. But so we're not spending a
• 23:06
  Speaker 9: lot of time on it, and from a global perspective, people,
• 23:09
  Speaker 9: we're watching it, but from a perspective of it, you know,
• 23:13
  Speaker 9: I'm not going to bed at night, not sleeping.
• 23:14
  Speaker 4: I'm less concerned any of those fears affecting the business
• 23:17
  Speaker 4: at all through your models.
• 23:19
  Speaker 9: At the moment, I would say, no, you know, some
• 23:22
  Speaker 9: of the bigger challenges that we face, and we face
• 23:24
  Speaker 9: challenges every day, right. I mean we've got you know,
• 23:26
  Speaker 9: what's going on in Russia and Ukraine, that's always been
• 23:28
  Speaker 9: a concern. You've got the potential concern of China and Taiwan.
• 23:32
  Speaker 9: That's a concern. So we watch all those spaces closely.
• 23:36
  Speaker 9: What we are what we are seeing is as we
• 23:39
  Speaker 9: get through this inventory. And you were talking about luxury
• 23:42
  Speaker 9: goods before I came on board. By my way, my
• 23:44
  Speaker 9: wife is a huge LVBAH so you know, and I
• 23:48
  Speaker 9: purchase our bags as well. But what I would say
• 23:50
  Speaker 9: is we have seen as slow down in luxury goods,
• 23:53
  Speaker 9: and that slowed down in luxury goods. What we're hearing
• 23:55
  Speaker 9: from our customers is they're spending much more on experiences.
• 23:58
  Speaker 9: Having come out of two years in COVID and not
• 24:01
  Speaker 9: being able to travel, not being able to get out.
• 24:03
  Speaker 9: They're using the money that they do have and they're
• 24:06
  Speaker 9: using it on experiences. And that's why I think we'll
• 24:08
  Speaker 9: see that through the summer as well.
• 24:10
  Speaker 4: What do you think that tells us about the economy?
• 24:12
  Speaker 4: Then if you're seeing sort of a shift, there is
• 24:14
  Speaker 4: this more of an optimistic sign for the economy rather
• 24:17
  Speaker 4: than when everyone's focused on the health of the consumer.
• 24:19
  Speaker 9: Yeah, and that's why I said it was a bit
• 24:21
  Speaker 9: more optimistic about the US consumer going into Q four.
• 24:24
  Speaker 9: And I do think we're going to have a real
• 24:26
  Speaker 9: peak season this year, whereas last year we had the
• 24:30
  Speaker 9: eternal Black Friday, the eternal Cyber Monday, and the sales
• 24:33
  Speaker 9: that went on for a healthy period of time. I
• 24:36
  Speaker 9: think we're going to see a bounce back in retail
• 24:38
  Speaker 9: from that perspective as well, and we're starting to see
• 24:41
  Speaker 9: that in the number of activations that are happening with
• 24:44
  Speaker 9: our customers.
• 24:45
  Speaker 1: Talk to us about the competitive environment. I mean FedEx
• 24:48
  Speaker 1: ups the United States Postal Service. I guess I don't know,
• 24:52
  Speaker 1: but FedEx, I mean they had the integrated T and T.
• 24:55
  Speaker 1: So talk just about the competitive land landscape.
• 24:57
  Speaker 9: Yeah, I mean, look, both our competitors, good companies, very
• 25:02
  Speaker 9: large domestic presence. Their focus is big time focus on domestic.
• 25:06
  Speaker 9: Our focus is predominantly one hundred percent internationally, more specifically
• 25:10
  Speaker 9: here in the United States. You know, you've got two
• 25:12
  Speaker 9: different things going on. You've got a transformation going on
• 25:15
  Speaker 9: on one side, which is an optimization of you know,
• 25:18
  Speaker 9: of an organization, uh as well as the future of
• 25:22
  Speaker 9: combining two different entities, which will be a first for
• 25:24
  Speaker 9: them on one side, and that that could potentially be
• 25:27
  Speaker 9: a distraction, is what I would say. The other or
• 25:31
  Speaker 9: the other side is an organization that is focusing on
• 25:34
  Speaker 9: yield and margin, which we focus on consistently from a
• 25:37
  Speaker 9: pricing perspective, an efficiency perspective, but also you know, a
• 25:41
  Speaker 9: labor potential challenge that they may be facing. So again
• 25:45
  Speaker 9: that's another distraction. Our focus right now is on making
• 25:49
  Speaker 9: sure that we're protecting the jobs that we do have,
• 25:52
  Speaker 9: protecting the customers that we do have, and growing our
• 25:55
  Speaker 9: business the right.
• 25:56
  Speaker 1: Way, Hey, Jess, I got to call out here, Mike's
• 25:59
  Speaker 1: worrying and a Miami Heat Cup links. Oh about the
• 26:04
  Speaker 1: Heat and Miami. How big a story is that in Miami.
• 26:07
  Speaker 9: Well, look, there's two big stories going on in Miami
• 26:10
  Speaker 9: right now. One is the Florida Panthers that are three
• 26:12
  Speaker 9: and oh right and in twenty seven years have never
• 26:16
  Speaker 9: reached the the NHL finals. And then we've got my
• 26:20
  Speaker 9: Miami Heat, God bless them, three and oh against Boston
• 26:24
  Speaker 9: eight seed, seven undrafted free agents that everybody keeps reminding
• 26:28
  Speaker 9: us about. And you've got an organization that really has
• 26:31
  Speaker 9: been there before but said they weren't going to beat
• 26:34
  Speaker 9: Milwaukee and they did. If you're a Knicks fan, I
• 26:37
  Speaker 9: apologize for everyone here said hey, you're going to have
• 26:40
  Speaker 9: a hard time against the Knicks, and we were able
• 26:43
  Speaker 9: to win there. And now we're up three to zero
• 26:45
  Speaker 9: against Boston and hoping to close it out tonight at home.
• 26:48
  Speaker 9: So excited. Excited for Jimmy Butler, excited for the Miami
• 26:53
  Speaker 9: Heat organization, but excited in general for sports sports because
• 26:58
  Speaker 9: you have an underdog team in both the We're the
• 27:00
  Speaker 9: Panthers eight seed in the NHL that are potentially going
• 27:04
  Speaker 9: to close it out and the eight seed Miami Heat
• 27:06
  Speaker 9: that can do it.
• 27:07
  Speaker 1: So good the story from them, that good story from im.
• 27:09
  Speaker 1: Now you get the baseball. The guess we all set.
• 27:11
  Speaker 1: Mike Paris, CEO of America, is for DHL Express, joining
• 27:15
  Speaker 1: us here in our studio. Appreciate geting the update on
• 27:17
  Speaker 1: the business and our friends at DHL.
• 27:20
  Speaker 4: As well as the thirtieth anniversary is coming up.
• 27:22
  Speaker 1: I know you've been at the companies and like out
• 27:25
  Speaker 1: very college.
• 27:26
  Speaker 9: Boom, it's my marriage, my wife.
• 27:30
  Speaker 1: Yeah, this is Bloomberg.
• 27:33
  Speaker 5: You're listening to the team. Ken's are live program Bloomberg
• 27:36
  Speaker 5: Markets weekdays at ten am eastering on Bloomberg dot com,
• 27:40
  Speaker 5: the iHeartRadio app and the Bloomberg Business app, or listen
• 27:43
  Speaker 5: on demand wherever you get your podcasts.
• 27:47
  Speaker 1: Currently, right now in Katara, there is the Qatar Economic
• 27:50
  Speaker 1: Form and that's where Caroline Hyde, a host of Bloomberg Technology,
• 27:54
  Speaker 1: track down the CEO of Tiktoks. We want to check
• 27:57
  Speaker 1: in with Caroline. We also got Man Deep singing here,
• 28:00
  Speaker 1: senior technologyannels for Bloomberg Intelligence. He's in our studio here,
• 28:03
  Speaker 1: Meek and Pepper Caroline some questions too, Caroline thanks so
• 28:06
  Speaker 1: much for joining us. You know your interview with show
• 28:11
  Speaker 1: Cho the CEO, hope I got that somewhat correct. For TikTok,
• 28:14
  Speaker 1: What were the key items? What were the key takeaways
• 28:16
  Speaker 1: you had from your discussion with the CEO of TikTok.
• 28:21
  Speaker 10: I mean, ah, boy, wasn't it newsie, Because of course,
• 28:24
  Speaker 10: just less than twenty four hours before sitting down with him,
• 28:27
  Speaker 10: it became public that indeed TikTok was suing the State
• 28:31
  Speaker 10: of Montana.
• 28:32
  Speaker 11: After of course, the state.
• 28:33
  Speaker 10: Of Antana has said that they're going to be going
• 28:35
  Speaker 10: further than any state has ever gone before and banning
• 28:38
  Speaker 10: the app from the beginning of January twenty twenty four.
• 28:41
  Speaker 10: So here was the statement coming from the CEO that
• 28:45
  Speaker 10: they feel that this is unconstitutional. The key takeaway was
• 28:48
  Speaker 10: that the key takeaway was feeling also that it looks
• 28:50
  Speaker 10: pretty confident. Ultimately, he feels that they will prevail, they'll
• 28:55
  Speaker 10: be able to stay in the United States. And why
• 28:57
  Speaker 10: is that Because they have one hundred and fifty million users,
• 28:59
  Speaker 10: they have people consuming next content and actually more business
• 29:02
  Speaker 10: is depending on it. But he didn't offer anything new
• 29:05
  Speaker 10: really in terms of what they're doing the state and
• 29:09
  Speaker 10: protect the privacy of US users. That's why Montana's of
• 29:13
  Speaker 10: course taking the step wanting to bang the lord about
• 29:15
  Speaker 10: the Chinese government having access to US data and still
• 29:20
  Speaker 10: there standing by this Oracle plan that is Project Texas,
• 29:24
  Speaker 10: that would be able to secure your data in the US,
• 29:27
  Speaker 10: they say, and ultimately prevent back door. He said, no
• 29:31
  Speaker 10: company can do and prevent them a backdoor any risks
• 29:33
  Speaker 10: one hundred percent that will be underrepresent the risks without level.
• 29:37
  Speaker 4: And Carolin, to your point, especially with lawmakers in the
• 29:40
  Speaker 4: US in these sort of ongoing security fears when it
• 29:43
  Speaker 4: comes to TikTok. You mentioned Oracle on how their TikTok
• 29:46
  Speaker 4: is working with them to sort of allay these types
• 29:49
  Speaker 4: of fears. He laid out any sort of options as
• 29:52
  Speaker 4: far as what there could be to potentially end up
• 29:56
  Speaker 4: mitigating some of these fears that are out there.
• 30:01
  Speaker 10: Ultimately, no, I mean they feel that they've gone further
• 30:04
  Speaker 10: than any other company to make clear that they can
• 30:08
  Speaker 10: protect data. Now remember, I mean Mandy will be able
• 30:11
  Speaker 10: to discuss this in depth. But this is but a
• 30:14
  Speaker 10: day after we understand that the EU is also finding
• 30:17
  Speaker 10: a record fine more than a billion to Meta. So
• 30:20
  Speaker 10: the fact that look, it's doing exactly what they currently
• 30:23
  Speaker 10: the Montana is warting that Chinese will do europe is
• 30:26
  Speaker 10: claiming that the US in meta is access and could
• 30:30
  Speaker 10: potentially access Europeans user data of Facebook or Instagram users
• 30:36
  Speaker 10: or WhatsApp or the other products that meta users, and
• 30:39
  Speaker 10: so they're doing meta. They're finding meta in fact by
• 30:43
  Speaker 10: saying that you haven't done enough to protect the privacy
• 30:46
  Speaker 10: of the EU user from the US. So, ultimately, this
• 30:49
  Speaker 10: is actually a deeply global conversation. We're getting very divided,
• 30:53
  Speaker 10: and I have to say that's actually something so Chu
• 30:55
  Speaker 10: spoke very eloquently on saying we are sort of heading
• 30:58
  Speaker 10: towards vulcanism here, ultimately putting barriers between a global internet
• 31:05
  Speaker 10: with creating frictions. And this is the worry he says ultimately, like,
• 31:09
  Speaker 10: how are you going to do this without the quote
• 31:11
  Speaker 10: unquote breaking the internet?
• 31:13
  Speaker 12: With his great fear Here, Caroline, you had a great
• 31:17
  Speaker 12: point around you know, the user of chat GPT and
• 31:20
  Speaker 12: how TikTok could actually use that for you know, generating
• 31:24
  Speaker 12: video content. What was your sense in terms of how
• 31:28
  Speaker 12: TikTok plans to use that or are they going to
• 31:31
  Speaker 12: develop their own model?
• 31:34
  Speaker 10: Ah, that would have been a great answer to get
• 31:37
  Speaker 10: to get from him. And then you're always analysis is
• 31:40
  Speaker 10: so thoughtful and discussion points about all these things about
• 31:45
  Speaker 10: ultimately how AI is going to make it a lot easier,
• 31:48
  Speaker 10: a lot more perhaps exciting for users and for content creators.
• 31:52
  Speaker 10: He didn't go as far to say that they're developing
• 31:54
  Speaker 10: their own lunch language model. I did put that to him,
• 31:57
  Speaker 10: and he said, they're just analyzing how a in generator
• 32:00
  Speaker 10: AI could be interesting and utiful to his business. They're
• 32:04
  Speaker 10: still assessing the risks, is the way that he said it.
• 32:06
  Speaker 10: But ultimately, I think AI this is why TikTok is
• 32:10
  Speaker 10: so successful and to many fears so addictive. It's because
• 32:15
  Speaker 10: of official intelligence and machine learning has meant that we
• 32:17
  Speaker 10: are posted things that we all find deeply interesting. It
• 32:20
  Speaker 10: happens to spark our imagination. The worry I put to
• 32:23
  Speaker 10: him as well is what if AI am particularly from
• 32:26
  Speaker 10: the AI filter, What if they make it even more
• 32:29
  Speaker 10: addictive to the young, or give even more unrealistic assessments
• 32:33
  Speaker 10: of what reality is like. Just think of the AI
• 32:37
  Speaker 10: filter that currently makes people more beautiful. I think it's
• 32:40
  Speaker 10: called the golden AI effects. Well, we've already empherticizing that
• 32:43
  Speaker 10: that it gives an unfair idea of really what beauty
• 32:46
  Speaker 10: is for the younger teenage, particularly female user of TikTok.
• 32:49
  Speaker 1: Right now, Hey, Caroline, is there a scenario, reasonable scenario
• 32:55
  Speaker 1: at all, where maybe white Edance would divest its ownership
• 32:59
  Speaker 1: of TikTok? Is that something that's even on the table.
• 33:02
  Speaker 1: Do you think.
• 33:05
  Speaker 10: They won't go there? They've said time and time again
• 33:07
  Speaker 10: that that will not solve the national security issue that
• 33:10
  Speaker 10: play here. They won't really go into it as to why. Ultimately,
• 33:14
  Speaker 10: I think because bike Dance receives the overall valuation of
• 33:18
  Speaker 10: this company the most valuable set up out there, and
• 33:21
  Speaker 10: doesn't want to have to forcibly go there at a
• 33:24
  Speaker 10: price point that isn't at the top level IPO. Would
• 33:28
  Speaker 10: an IPO solve this? I mean, it's certainly something there
• 33:30
  Speaker 10: eventually will be on the agenda for the company, But
• 33:33
  Speaker 10: I think for now they're really taking any selling to
• 33:37
  Speaker 10: another US party off the agenda, off the table. They
• 33:41
  Speaker 10: don't feel that's going to secure the national security argument.
• 33:44
  Speaker 10: What will they say is the Project Texas, Project Clover's
• 33:48
  Speaker 10: ability to keep the US data safely in the US
• 33:51
  Speaker 10: and ensure there's no backdoors, But certainly any sort of
• 33:53
  Speaker 10: spinough doesn't seem to be something that they want to
• 33:55
  Speaker 10: negotiate on.
• 33:56
  Speaker 4: Something that struck me, Caroline, is that despite what's going
• 33:59
  Speaker 4: on with these political tensions, TikTok hasn't really eased its
• 34:03
  Speaker 4: push when it comes to monetization. Can you talk to
• 34:05
  Speaker 4: us more about some of these other ventures like live streaming,
• 34:08
  Speaker 4: commerce and in other places of the world that they're
• 34:11
  Speaker 4: still going into at this.
• 34:12
  Speaker 10: Point, Yeah, and actually really rolling it out much more
• 34:16
  Speaker 10: fast and furiously. In the United States, for example, it's
• 34:20
  Speaker 10: one much more it in say Singapore and in Asia
• 34:24
  Speaker 10: is ecommerce basically making it that much easier to be
• 34:27
  Speaker 10: able to purchase, to do your shopping, to bring more
• 34:29
  Speaker 10: than mediums to identerprises onto TikTok. Of course, the general
• 34:33
  Speaker 10: revenue model in the US thus far and in Europe
• 34:36
  Speaker 10: as you're a user, has been advertising, as is the
• 34:39
  Speaker 10: way with all social media products at the moment, and
• 34:42
  Speaker 10: that the highs and the lows. That that ends up
• 34:44
  Speaker 10: meaning in a way that we are sent various pushes
• 34:49
  Speaker 10: to make purchases, but they want intertwined commerce far more
• 34:53
  Speaker 10: into the business. So TikTok shop is something that's really
• 34:56
  Speaker 10: being rolled out at the moment and focused in particular
• 34:59
  Speaker 10: in the US and U. The XP had to piece
• 35:01
  Speaker 10: out how they're moving some of their talents tickly from
• 35:03
  Speaker 10: Brazil and other countries to the US and UK to
• 35:05
  Speaker 10: focus in on how I can ultimately, yeah, monetize our rivals.
• 35:09
  Speaker 10: The room of the health hard at.
• 35:10
  Speaker 1: The moment, Man Manty. From a technical perspective, this is
• 35:14
  Speaker 1: on showing of data this project Texas. As you know,
• 35:17
  Speaker 1: as Caroline was talking to the CEO, it kind of
• 35:19
  Speaker 1: made sense to me from a technical perspective, shouldn't that
• 35:23
  Speaker 1: be a good fix?
• 35:24
  Speaker 12: I mean, look at this week, you know Meta having
• 35:27
  Speaker 12: to pay fines because of data sovereignty issues. So clearly
• 35:30
  Speaker 12: this is something and Caroline touched on that during her
• 35:33
  Speaker 12: interview that you know, this is something that every company
• 35:37
  Speaker 12: has to do it. There is no choice, and the
• 35:39
  Speaker 12: sooner they do it, I think the better off. David,
• 35:42
  Speaker 12: it'll be from a regulatory standpoint, I do think, you know,
• 35:45
  Speaker 12: with the proliferation of machine generated data, it's going to
• 35:49
  Speaker 12: get harder and harder. You can control user generated data
• 35:52
  Speaker 12: in terms of where it's stored, but when it comes
• 35:55
  Speaker 12: to you know, a large language model, curating new types
• 35:58
  Speaker 12: of content, how do you control that? And so that
• 36:01
  Speaker 12: will be the hard problem to solve.
• 36:04
  Speaker 4: Mand But what do you think is coming next as
• 36:07
  Speaker 4: far as what you're watching as an analyst when it
• 36:09
  Speaker 4: comes to all of the sort of political in security
• 36:12
  Speaker 4: questions when it comes to TikTok.
• 36:14
  Speaker 12: Well, so I think again, it was a wide ranging
• 36:18
  Speaker 12: interview and he touched on a few things, but for me,
• 36:21
  Speaker 12: the key question was what happens to TikTok's independence if
• 36:25
  Speaker 12: you know they are forced to divest and and that
• 36:28
  Speaker 12: you know, Oracle seems to be the front runner when
• 36:31
  Speaker 12: it comes to you know, how they have engaged with
• 36:33
  Speaker 12: the company. Clearly, there are only a handful of social
• 36:37
  Speaker 12: media assets which have you know, over a billion monthly
• 36:41
  Speaker 12: active users, and TikTok is that kind of platform where
• 36:45
  Speaker 12: it can be very powerful, but it comes when it
• 36:47
  Speaker 12: comes to security. Clearly there are threats and I think
• 36:51
  Speaker 12: there are a lot of unanswered questions even uh, I
• 36:54
  Speaker 12: think Aroline covered a lot of ground in our interview,
• 36:57
  Speaker 12: but definitely something that I'm sure regulators will Pressdick dot
• 37:03
  Speaker 12: com all right.
• 37:04
  Speaker 1: And everybody you can check out. That is a great interview.
• 37:06
  Speaker 1: Caroline Hyde with the CEO of TikTok from the Cutter
• 37:09
  Speaker 1: Economic Form. You can catch that on Bloomberg dot Com.
• 37:11
  Speaker 1: It's Caroline Hyde, anchor for Bloomberg Technology, man Deep Seeing
• 37:15
  Speaker 1: senior techanomals for Bloomberg Intelligence. And again Caroline's interview this
• 37:18
  Speaker 1: morning from Qatar was really interesting. I'm not sure what
• 37:22
  Speaker 1: the solution there is because of this Chinese ownership, Jess.
• 37:25
  Speaker 1: You know, I just don't know where we go. Is
• 37:28
  Speaker 1: it an ipo? Is it a spin off this oracle
• 37:30
  Speaker 1: buy it?
• 37:31
  Speaker 6: Right?
• 37:31
  Speaker 1: But it's not going away. I mean it's too popular.
• 37:34
  Speaker 4: Right, and Bloomberg Intelligence recently had this evaluation on it
• 37:38
  Speaker 4: that was, I mean north of fifty billion dollars.
• 37:41
  Speaker 13: Wow.
• 37:41
  Speaker 1: Yeah, So again it's big, as many people saying, and
• 37:44
  Speaker 1: it's got size, it's got scale, So you just got
• 37:46
  Speaker 1: to figure out what the best ownership structure is.
• 37:48
  Speaker 5: You're listening to the tape. Catch our live program Bloomberg
• 37:52
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 37:55
  Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business app.
• 37:59
  Speaker 5: You can also listen. I have on Amazon Alexa from
• 38:01
  Speaker 5: our flagship New York station, just say Alexa playing Bloomberg
• 38:05
  Speaker 5: eleven thirty.
• 38:06
  Speaker 1: That all right, Jess, commodities and stuff commodities here, the
• 38:10
  Speaker 1: Bloomber commodity index over the trailing twelve months is off
• 38:13
  Speaker 1: twenty six percent. I mean, what does that tell us.
• 38:17
  Speaker 1: I'm going to sign some blame here, folks. I'm going
• 38:20
  Speaker 1: to sign the blame to Mike mac bloane. He's a
• 38:22
  Speaker 1: senior macro strategist. He's our commodities. Go to the person
• 38:24
  Speaker 1: for Bloomberg Intelligence. Mike. When you see that kind of
• 38:27
  Speaker 1: move in the Bloomer commodity Nicks, what's that telling you?
• 38:30
  Speaker 14: Well? And thank you to take the blame. Happy to
• 38:32
  Speaker 14: take the blame. It is showing pretty severe deflation. The
• 38:35
  Speaker 14: last time it was down more than that on a
• 38:38
  Speaker 14: twelve oneth basis was that the depth of the financial crisis.
• 38:41
  Speaker 14: And the key difference is the FED was aggressively easing,
• 38:44
  Speaker 14: in fact, started easing in September two thousand and seven,
• 38:46
  Speaker 14: and commodities didn't really bottom until beginning to two thousand
• 38:49
  Speaker 14: and nine. And that's the difference. Now they're showing severe
• 38:52
  Speaker 14: deflationary forces. That's the fact. As you mentioned, yet the
• 38:55
  Speaker 14: FED is still tightening. And if you look at our
• 38:57
  Speaker 14: warp function, and the futures they're showing that we actually
• 39:01
  Speaker 14: might tighten at the June meeting.
• 39:05
  Speaker 4: So, Mike, what does that tell us about the trajectory
• 39:07
  Speaker 4: of the economy. Then, when we're looking at how quantity
• 39:10
  Speaker 4: prices are performing at this.
• 39:11
  Speaker 14: Point, lowis lose. I'm glad you mentioned it, Jessa. There
• 39:14
  Speaker 14: was a lot of optimism that we'd see decent demand
• 39:17
  Speaker 14: pull out at China and the reopening, and that's clearly
• 39:20
  Speaker 14: not happening. We're seeing very disappointing data. Now we somewhat
• 39:23
  Speaker 14: predicted that, and it's also showing up in copper copper
• 39:26
  Speaker 14: doctor copper, the metal known as the APH and D
• 39:29
  Speaker 14: in economics, it jumped up twelve percent of the year
• 39:31
  Speaker 14: and now it's back down in the year, and that
• 39:33
  Speaker 14: is very deflation neary implications also for risk acids. So
• 39:38
  Speaker 14: I like to let's just tilt it over to copper copper.
• 39:40
  Speaker 14: If you look at the dollar price of copper, it's
• 39:42
  Speaker 14: about two dollars and seventy five cents a pound. If
• 39:45
  Speaker 14: you overlay it with a stock market and just take
• 39:47
  Speaker 14: the s P five hundred divide by thousand, they've been
• 39:49
  Speaker 14: almost the same price since twenty fifteen. So it shows
• 39:52
  Speaker 14: we're not getting that demand pull. The FED is still
• 39:55
  Speaker 14: tightened based on kind of lagging measures of inflation. Yet
• 39:58
  Speaker 14: the forward looking markets are severe deflation just starting to
• 40:01
  Speaker 14: kick in. So I look at it as a train
• 40:03
  Speaker 14: wreck for deflation.
• 40:05
  Speaker 1: So, Mike, in your research, you've written that you believe
• 40:08
  Speaker 1: we are in the midst of the biggest economic reset
• 40:11
  Speaker 1: of our lifetimes. Now, I want you to explain that
• 40:13
  Speaker 1: to me as if I'm a fifty nine year old person.
• 40:17
  Speaker 14: Well, okay, how about a six year old person. That
• 40:20
  Speaker 14: might help for me. I think I peaked when IL six.
• 40:23
  Speaker 14: It's the Let's go back to Ben Bernaki's warning about
• 40:27
  Speaker 14: the when he wrote the Essays and the Great Depression.
• 40:30
  Speaker 14: He said, the number one reason we all kind of
• 40:32
  Speaker 14: knew what happened was because central banks, most know the
• 40:35
  Speaker 14: find of reserve, was pulling back on liquidity and money
• 40:39
  Speaker 14: markets and money supply at the time the economy started
• 40:44
  Speaker 14: a tilt lower. That's exactly what we're doing now. And also,
• 40:47
  Speaker 14: if you study the lessons of history, all booms and
• 40:49
  Speaker 14: busts come on the back of the booms start with
• 40:51
  Speaker 14: massive liquidity, and then they bust when that liquidity goes away.
• 40:55
  Speaker 14: We've had the biggest boom in liquidity ever and the
• 40:57
  Speaker 14: sharpest bust in liquidity ever. It's all happened now, and
• 41:00
  Speaker 14: I look at it as simple lessons of history, simple
• 41:03
  Speaker 14: lessons of markets that you should be very careful. And
• 41:05
  Speaker 14: I just look at the fact that the FED is
• 41:07
  Speaker 14: still tightening despite the producer price index dropping at the
• 41:11
  Speaker 14: fastest pace in history. Now, yes, we only go back
• 41:13
  Speaker 14: seventy five years. It peaked at eighteen percent last year.
• 41:16
  Speaker 14: Year of year, now it's two percent. It's very likely
• 41:18
  Speaker 14: to go negative in the next few months. Is just
• 41:20
  Speaker 14: classic cases of the FED venue a little bit too
• 41:23
  Speaker 14: far behind and actually, you know, responding to all that
• 41:27
  Speaker 14: massive pump and liquidity, and now they're fighting an inflation
• 41:30
  Speaker 14: game that's starting to tilt towards deflation and it's just
• 41:33
  Speaker 14: getting started. The long and variable lags are quite disconcerting.
• 41:36
  Speaker 11: Mike.
• 41:37
  Speaker 4: You brought up copper, obviously very critical when it comes
• 41:39
  Speaker 4: to a base metal, and what that means for the
• 41:41
  Speaker 4: global economy. What's sort of the make or break levels
• 41:44
  Speaker 4: that you're watching for copper to mean if it breaks
• 41:47
  Speaker 4: below a particular point, what that could mean for other
• 41:49
  Speaker 4: asset classes, especially say when we look at the US
• 41:52
  Speaker 4: stock market.
• 41:53
  Speaker 14: Well, I'm glad you mentioned that, Jess. It's actually right
• 41:55
  Speaker 14: now with three dollars and sixty six three hours of
• 41:59
  Speaker 14: sixty six of pump on, which implies the S and
• 42:01
  Speaker 14: P five hundred should be about three thousand, six hundred.
• 42:04
  Speaker 14: Right now it's four two hundred. That's just course, maybe
• 42:06
  Speaker 14: that has broken down. But when copper broke down below
• 42:09
  Speaker 14: four four dollars, that was to me the signal that, Okay,
• 42:12
  Speaker 14: everything's sot in a tilt lower now, because one thing
• 42:15
  Speaker 14: that led it was natural gas. Natural gas has dropped
• 42:17
  Speaker 14: eighty percent from last year's peak and it dropped to
• 42:19
  Speaker 14: the same level as nineteen ninety. First traded in nineteen ninety,
• 42:22
  Speaker 14: So it's severe deflation for a significant commodity. And to me,
• 42:26
  Speaker 14: all that is tilting lower, and it keeps the question
• 42:28
  Speaker 14: I like to ask myself, Jess, is what stops this
• 42:30
  Speaker 14: downward trajectory? Now natural gas is bottom of two, but
• 42:33
  Speaker 14: had to drop eighty percent to get there. Typically takes
• 42:36
  Speaker 14: prices to go very low, squash that to supply and
• 42:40
  Speaker 14: increase that demand, and we're just in that current trajectory.
• 42:43
  Speaker 14: And I asked myself, so what stops this downward trajectory.
• 42:46
  Speaker 14: Typically it takes lower prices or most notably a long
• 42:50
  Speaker 14: and variable lackt is significant federal reserve easing and we're
• 42:52
  Speaker 14: still priced are tightening next month.
• 42:55
  Speaker 1: So if we are in the midst of the biggest
• 42:57
  Speaker 1: economic reset of our lifetime, do I just go long
• 42:59
  Speaker 1: gold and short everything else?
• 43:01
  Speaker 14: Well, there's nothing wrong with good old government to your
• 43:04
  Speaker 14: notes that are given you right now four point three
• 43:06
  Speaker 14: nine percent. Remember they piked at five percent, that was
• 43:08
  Speaker 14: right before the crisis. I think that's what most rational
• 43:12
  Speaker 14: boomers in the planet are doing, saying thank you very much,
• 43:15
  Speaker 14: meaning in two years I'm going to get almost nine
• 43:17
  Speaker 14: percent back guaranteed. Of course, of defenderal the government, Well,
• 43:21
  Speaker 14: they might delay the payment in wood, but there won't
• 43:23
  Speaker 14: be the fault, so that sweeps what's happening. There was
• 43:25
  Speaker 14: some prominent analysts today coming out and recommending gold, and
• 43:28
  Speaker 14: I will point about gold. Gold is the best performing
• 43:32
  Speaker 14: major commodity on the year of a year basis. Despite
• 43:34
  Speaker 14: the Bloomer Commodity Index down twenty six six percent, Gold
• 43:37
  Speaker 14: is in that index, but it's up six percent. I
• 43:39
  Speaker 14: think gold's on the customs a pretty significant breakout, just
• 43:42
  Speaker 14: like it did in two thousand and seven and eight,
• 43:44
  Speaker 14: it was bumping up against eight hundred dollars and they
• 43:47
  Speaker 14: finally popped to around nineteen hundred. We got by the
• 43:49
  Speaker 14: time we got to twenty eleven, Paul I pulled up.
• 43:52
  Speaker 4: The copper to gold ratio here on the terminal. There
• 43:55
  Speaker 4: is such a thing.
• 43:56
  Speaker 1: Why do you know it?
• 43:57
  Speaker 8: I mean, what is that cover this on the for
• 44:01
  Speaker 8: US stocks? As Oh, okay, follow these things, all things macro,
• 44:05
  Speaker 8: not just equities. But I want to get your thoughts
• 44:08
  Speaker 8: on this because when you're looking at the copper to
• 44:11
  Speaker 8: gold ratio, and we saw it this year hit a
• 44:14
  Speaker 8: high in February, but now you're seeing that even below
• 44:19
  Speaker 8: where it had been last summer. I'm wondering, again, what
• 44:22
  Speaker 8: does this tell us when you're seeing that ratio, because
• 44:24
  Speaker 8: typically when the ratio is higher, that usually mean better
• 44:27
  Speaker 8: days ahead for the stock market.
• 44:29
  Speaker 14: Yes, I'm justin glad you bring that up. I watch
• 44:31
  Speaker 14: it a lot, and also some prominent infix and interest
• 44:36
  Speaker 14: rate people watch it. It's showing a tilt towards recession.
• 44:40
  Speaker 14: And one thing I'll point about copper goals. Oftentimes I
• 44:42
  Speaker 14: like to walk it with gold divided by copper because
• 44:44
  Speaker 14: that shows an the neurine upward trend. And it's keating
• 44:46
  Speaker 14: to remember about gold, it basically outperforms almost all commondies
• 44:50
  Speaker 14: over time, partly because it's money you can store cheaply,
• 44:53
  Speaker 14: and it's really no cost to store, and there's a
• 44:55
  Speaker 14: limited supply. Copper you can bring on rather not quickly,
• 44:59
  Speaker 14: but there's it's just much easier to produce and create
• 45:03
  Speaker 14: more of it than gold. But the key thing that
• 45:05
  Speaker 14: you mentioned is comparent declining versus gold is a clear recession.
• 45:08
  Speaker 14: You're introjectory. And I asked myself, okay, so what might
• 45:11
  Speaker 14: stop this? Typically I would say, okay, well we've been
• 45:13
  Speaker 14: a year or two and two FED easing and the
• 45:16
  Speaker 14: economy is starting to expand and recover. We're still here
• 45:19
  Speaker 14: and started at easing, we're still tightening. That's why I
• 45:21
  Speaker 14: really concerned that this is going to be one of
• 45:23
  Speaker 14: the biggest resets of our lifetime.
• 45:25
  Speaker 9: Now.
• 45:25
  Speaker 14: In the defense of the FED, they are tightening, they
• 45:28
  Speaker 14: have to, but the inflation measures they're looking at, like
• 45:30
  Speaker 14: personal consumption expenditures as on a wong Or Chief Economists
• 45:33
  Speaker 14: told us those are going to be very sticky, and
• 45:36
  Speaker 14: she pointed out the FED will not be easing like
• 45:38
  Speaker 14: they have in the past, although their models have pointed
• 45:40
  Speaker 14: to ease, but they can't because inflation is sticky. That
• 45:43
  Speaker 14: shows all the negativity that I see. And I don't
• 45:46
  Speaker 14: like to be mcloum, which has been my nickname. I
• 45:48
  Speaker 14: like to be more Mick facts.
• 45:50
  Speaker 5: These are the.
• 45:50
  Speaker 1: Facts, all right, Mike. Somehow you scam to move down
• 45:54
  Speaker 1: to South Florida and getting a little warm down there,
• 45:56
  Speaker 1: you still committed.
• 45:58
  Speaker 14: Oh yes it is. I'm getting older and it's it's
• 46:01
  Speaker 14: much better on the bones and muscles of that humidity.
• 46:04
  Speaker 1: All right, Mike, great stuff, Really appreciate it. Mike mcglohan,
• 46:06
  Speaker 1: Senior macro strategist for Bloomberg Intelligence.
• 46:09
  Speaker 5: You're listening to the tape Ken's are Live program Bloomberg
• 46:12
  Speaker 5: Markets weekdays at ten am Eastern on Bloomberg Radio, the
• 46:16
  Speaker 5: tune in app, Bloomberg dot Com, and the Bloomberg Business App.
• 46:19
  Speaker 5: You can also listen live on Amazon Alexa from our
• 46:22
  Speaker 5: flagship New York station, just say Alexa playing Bloomberg eleven thirty.
• 46:28
  Speaker 1: All right, let's go to this Low's So we had
• 46:30
  Speaker 1: home deepot before. They were kind of cautious, and we
• 46:33
  Speaker 1: saw that reflected in the lower stock price, their guidance
• 46:36
  Speaker 1: was a little bit soft Low's. I'm looking at the stock,
• 46:40
  Speaker 1: it's up three percent even though they cut their view here.
• 46:42
  Speaker 1: So let's bring in somebody who does this stuff for
• 46:44
  Speaker 1: a living, Drew Redding. He's a research channels to Bloomberg Intelligence.
• 46:47
  Speaker 1: He covers all the housing and housing related industries.
• 46:50
  Speaker 6: Drew.
• 46:50
  Speaker 1: What's your takeaway from Low's particularly and maybe differentiate it
• 46:53
  Speaker 1: from what we saw from Home Depot.
• 46:56
  Speaker 11: Yeah, So, to be honest, we didn't hear anything that
• 46:58
  Speaker 11: was all that different compared to what we heard last
• 47:00
  Speaker 11: week from Home Depot, and that sales were impacted by
• 47:03
  Speaker 11: a late start spring. You had commodity deflation, particularly for lumber,
• 47:08
  Speaker 11: and a slowdown in discretionary spending. So we're finally starting
• 47:11
  Speaker 11: to see that moderation big ticket spending, which has been
• 47:14
  Speaker 11: a key driver for the industry in terms of the
• 47:17
  Speaker 11: stock reaction. There's probably a couple of factors of play
• 47:20
  Speaker 11: here for starters. We did see last week Home Deep
• 47:23
  Speaker 11: be lower the guide, and so I think it was
• 47:25
  Speaker 11: kind of increasingly understood that Lows would be under a
• 47:28
  Speaker 11: bit of pressure here from a fundamental perspective, and at
• 47:31
  Speaker 11: the same time, a lot of the weakness in the
• 47:32
  Speaker 11: quarter was attributable to weather commodity deflation, which aren't necessarily
• 47:37
  Speaker 11: representative of the underlying business, and I think that led
• 47:40
  Speaker 11: to a little bit of optimism around the guide. But
• 47:42
  Speaker 11: that's actually where we think that there could still be
• 47:44
  Speaker 11: some risk, particularly since they didn't cut it as much
• 47:47
  Speaker 11: as some depot. You know, from where we're sitting, it
• 47:50
  Speaker 11: seems like we're just getting started with this slowdown indiscretionary spending,
• 47:53
  Speaker 11: particularly for big ticket spending. So I think that's where
• 47:56
  Speaker 11: a lot of the debate will be going forward into
• 47:59
  Speaker 11: the next.
• 47:59
  Speaker 4: Couple of So, Drew, it sounds like you're saying their
• 48:02
  Speaker 4: outlook seems to be a bit too optimistic, even though
• 48:05
  Speaker 4: they already cut it.
• 48:08
  Speaker 11: Yeah, so they lowered their their same source sales view
• 48:10
  Speaker 11: to a decline of two to four percent from flat
• 48:13
  Speaker 11: to down two percent last time, and that assumes that
• 48:16
  Speaker 11: the broader home improvement industry is down about mid single digits.
• 48:21
  Speaker 11: You know, we think that there is risk that the
• 48:24
  Speaker 11: broader industry declines more in the high single digit range.
• 48:27
  Speaker 11: It's something we heard from Home Depot. We actually heard
• 48:29
  Speaker 11: it from a number of the building product manufacturers who
• 48:33
  Speaker 11: were tied into the repairing ram modeling market. So, like
• 48:35
  Speaker 11: I said, I think the debate will be did they
• 48:37
  Speaker 11: bring down guidance enough or are we just starting to
• 48:41
  Speaker 11: kind of see this downward revision because there's still some
• 48:44
  Speaker 11: strain on the consumer as we get through the end
• 48:46
  Speaker 11: of the year.
• 48:47
  Speaker 1: Drew Occasionally I do get lost and I find myself
• 48:49
  Speaker 1: in the middle of a home depot or lows and
• 48:52
  Speaker 1: what I noticed is there's a ton of stuff out
• 48:55
  Speaker 1: on the floor, like of tons of inventory. How are
• 48:58
  Speaker 1: these those companies and the home improvement bus is how
• 49:00
  Speaker 1: are their inventories? I know that was an issue for
• 49:02
  Speaker 1: a lot of retail. Was that also an issue for
• 49:04
  Speaker 1: these homer furnishing folks.
• 49:07
  Speaker 11: Yeah, not at this point. I mean, they did get
• 49:10
  Speaker 11: ahead of the game earlier in the pandemic, so they
• 49:12
  Speaker 11: were well stocked. They did have a couple of quarters
• 49:14
  Speaker 11: where they started to work down some of that inventory,
• 49:17
  Speaker 11: but now their inventory is in a good position, so
• 49:19
  Speaker 11: it's really not a concern in terms of having to discount.
• 49:22
  Speaker 11: You know, they implement a lot of technology into the
• 49:24
  Speaker 11: stuff they're doing, particularly you know, when the work on
• 49:27
  Speaker 11: their marchandise categories, they know what's moving they have a
• 49:30
  Speaker 11: pretty good read on demand, so from an inventory perspective,
• 49:34
  Speaker 11: they're looking pretty good.
• 49:35
  Speaker 4: So what do you think this tells us about the
• 49:38
  Speaker 4: state of the US consumer at this point?
• 49:42
  Speaker 11: So we do think that there's still some challenges out
• 49:45
  Speaker 11: there for the consumer, and it looks like, you know,
• 49:46
  Speaker 11: in the home improvement category, which has been one of
• 49:49
  Speaker 11: the retail bright spots recently, we think they're just starting
• 49:53
  Speaker 11: to show. You know, you've got inflation which is hurting
• 49:56
  Speaker 11: people's wallets, Real incomes are down, We've seen credit card
• 50:00
  Speaker 11: balances starting to balloon. So all of these things point
• 50:05
  Speaker 11: to more stress among the consumer. You know, at the
• 50:09
  Speaker 11: same time, interest rates have sneakily crept back up to
• 50:11
  Speaker 11: seven percent, so you know, to the extent that you
• 50:14
  Speaker 11: see more pressure on the existing home market, obviously that'll
• 50:19
  Speaker 11: trickle down into what we're seeing at the home improvement
• 50:21
  Speaker 11: retailers as well.
• 50:22
  Speaker 1: All Right, Drew, you also cover the broader housing market.
• 50:25
  Speaker 1: Talk to us about kind of where we are in
• 50:28
  Speaker 1: the housing market. What are you seeing, What are you
• 50:30
  Speaker 1: hearing from the Toll Brothers of the world, the d
• 50:32
  Speaker 1: H Wardens, What are they saying about their business? Given
• 50:34
  Speaker 1: that you know, as you mentioned, we have mortgage rates
• 50:36
  Speaker 1: around seven Pasl.
• 50:37
  Speaker 4: Brothers also reports after the bell today.
• 50:39
  Speaker 1: Oh very good, thank you.
• 50:40
  Speaker 11: Yep. It's a great question, because I think there's right
• 50:43
  Speaker 11: now we're seeing a bifurcation in the US housing market
• 50:45
  Speaker 11: between the existing home market and the new home market.
• 50:49
  Speaker 11: And it really has to do with a couple of factors. One,
• 50:51
  Speaker 11: there's not a whole heck of a lot of inventory
• 50:53
  Speaker 11: in the resale market. One of the reasons is because
• 50:55
  Speaker 11: a lot of current homeowners have rates below four below
• 50:58
  Speaker 11: three and a half percent, so there's a disincentive for
• 51:01
  Speaker 11: them to list their home and take on a rate
• 51:03
  Speaker 11: that's now, as you said, approaching seven percent. So that's
• 51:07
  Speaker 11: keeping inventory low. At the same time, nobody wants to
• 51:09
  Speaker 11: lower the prices. They made all this equity over the
• 51:12
  Speaker 11: last couple of years, and they want to sell their
• 51:14
  Speaker 11: house at last year's prices, and buyers are playing ball.
• 51:18
  Speaker 11: On the other hand, the business model the home builders
• 51:20
  Speaker 11: requires that they turn their inventory over. So what they've
• 51:24
  Speaker 11: done is they at the end of last year, they
• 51:26
  Speaker 11: got aggressive and cutting prices. They cut base prices, they're
• 51:29
  Speaker 11: offering more incentives. But most importantly, and what's worth the
• 51:32
  Speaker 11: best is that builders are able to offer the buyers
• 51:36
  Speaker 11: rate by downs. So whereas somebody looking in the existing
• 51:40
  Speaker 11: home market is looking at the interest rate of six
• 51:42
  Speaker 11: and a half to seven percent, builders are getting people
• 51:44
  Speaker 11: through the door at five to five and a half percent.
• 51:47
  Speaker 11: So the combination of lower prices and offering a lower
• 51:50
  Speaker 11: rates helped the math work better in the new home market,
• 51:53
  Speaker 11: and that's why we're seeing share gains there and we
• 51:55
  Speaker 11: think that continues in the coming quarters.
• 51:57
  Speaker 4: Also, and it comes to just the low amount of inventory.
• 52:00
  Speaker 4: Clearly that was a problem before the pandemic, but then
• 52:03
  Speaker 4: even exacerbated more So, how are home builders still benefiting
• 52:07
  Speaker 4: from that? Because when I'm talking to portfolio managers, a
• 52:09
  Speaker 4: lot of them are still adding exposure to homebuilder stocks
• 52:12
  Speaker 4: because they feel like there's just this mixed smash there
• 52:14
  Speaker 4: and that they'll ply continue to benefit from that low inventory.
• 52:18
  Speaker 11: Yeah, you're absolutely right. I mean, the lack of resale
• 52:20
  Speaker 11: supply continues to funnel buyers into the new home market.
• 52:25
  Speaker 11: And the interesting thing is that builders were putting all
• 52:28
  Speaker 11: this new supply into market and it's just kind of
• 52:31
  Speaker 11: this steady drip that you know, a couple months ago,
• 52:35
  Speaker 11: everybody was worried about there's going to be an oversupply
• 52:37
  Speaker 11: of new housing. But as builders have kind of made
• 52:40
  Speaker 11: the math work, we're seeing that home shoppers are increasingly
• 52:44
  Speaker 11: preferring this quick move in inventory that where a buyer
• 52:47
  Speaker 11: can go, they can lock in their rate and they
• 52:49
  Speaker 11: have some confidence that they know what their monthly payment's
• 52:52
  Speaker 11: going to be. So I think that builders who have
• 52:54
  Speaker 11: a spec focused model where the inventory is there a
• 52:57
  Speaker 11: buyer can move right in, are position in this environment
• 53:01
  Speaker 11: because buyers are looking for certainty given all the rate volatility.
• 53:05
  Speaker 1: How about the inexisting market, how how's that trending?
• 53:10
  Speaker 11: Yeah, so it's I mean from a transaction perspective, like
• 53:13
  Speaker 11: we said, sales are down sharply compared to the new
• 53:16
  Speaker 11: home market, and that's because there's not enough people willing
• 53:18
  Speaker 11: to sell their home. From a pricing perspective, prices have
• 53:22
  Speaker 11: held up relatively well, you know, from the peak. We're
• 53:25
  Speaker 11: only down low single digits.
• 53:28
  Speaker 1: One.
• 53:28
  Speaker 11: That's because people don't have to sell. There's no forced sellers.
• 53:31
  Speaker 11: People have a lot of equity right now. The job
• 53:34
  Speaker 11: market is still strong, so people aren't forced to put
• 53:36
  Speaker 11: their home on the market. They're comfortable with their low rate,
• 53:39
  Speaker 11: they're comfortable with their wage increases. Conversely, in the new
• 53:43
  Speaker 11: home market, prices are down much more because builders have
• 53:45
  Speaker 11: been aggressive and kind of cutting them. So in the
• 53:48
  Speaker 11: resale markets, transactions down prices supported by that low inventory.
• 53:54
  Speaker 4: That's interesting because if you don't want to move and
• 53:56
  Speaker 4: you've locked in this low rate, wouldn't that still help
• 53:59
  Speaker 4: home builders, especially if there's already that low inventory that
• 54:02
  Speaker 4: we were talking about.
• 54:04
  Speaker 11: Yeah, certainly, so I think that that dynamic favors homebuilders,
• 54:07
  Speaker 11: and it also favors renovating over moving, and I think
• 54:11
  Speaker 11: we saw a lot of that with the home depot
• 54:13
  Speaker 11: and lows and building product manufacturers, where you probably saw
• 54:16
  Speaker 11: a lot of demand pulled forward over the last couple
• 54:19
  Speaker 11: of years. Now, those same people that aren't moving have
• 54:22
  Speaker 11: massive amounts of home equity, so even if home prices
• 54:25
  Speaker 11: were to fall mid single digits, there's still a lot
• 54:29
  Speaker 11: of equity built in those properties. So with decreased mobility,
• 54:32
  Speaker 11: we would expect that remodeling, once we kind of get
• 54:35
  Speaker 11: through this air pocket of demand, starts to pick back up,
• 54:38
  Speaker 11: and that industry is looking really good over the longer term.
• 54:41
  Speaker 1: All right, Drew, thanks so much for joining us. Always
• 54:43
  Speaker 1: appreciate getting your perspective on the broader housing market and
• 54:46
  Speaker 1: also on some of these housing related retailers like Low's
• 54:49
  Speaker 1: and Home Depot reading. He's a research analyst covers all
• 54:52
  Speaker 1: the housing stuff for Bloomberg Intelligencies based down in our Princeton,
• 54:56
  Speaker 1: New Jersey campus.
• 54:58
  Speaker 5: You're listening to the date. That's our live program, Bloomberg
• 55:01
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• 55:05
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• 55:08
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• 55:17
  Speaker 1: When reading kind of the background the resume of our
• 55:19
  Speaker 1: next guest, I noted the fact that he's a twenty
• 55:22
  Speaker 1: nine year Navy veteran. There's like I who does not
• 55:25
  Speaker 1: like change, but he served all over the globe. That
• 55:28
  Speaker 1: kind of got my attention, and we thank him for
• 55:30
  Speaker 1: his service. Of course, Jess looks at it and she sees, oh,
• 55:35
  Speaker 1: he went to Texas a and m.
• 55:36
  Speaker 8: As I did too, so too, Aggie.
• 55:38
  Speaker 4: Is how exciting to have it in one segment?
• 55:41
  Speaker 1: All right? Kevin Brand defense policy anols for Bloomberg Intelligence. Kevin,
• 55:44
  Speaker 1: thanks so much for joining us here. I need you know,
• 55:47
  Speaker 1: I follow the military military history pretty closely over for
• 55:50
  Speaker 1: a long time. Here's a new one for me when
• 55:53
  Speaker 1: this war broke out in Ukraine. Hypersonic weapons. What is
• 55:57
  Speaker 1: a hypersonic hypersonic weapon? I've never heard of that before.
• 56:01
  Speaker 13: Yeah, great, thanks for having me.
• 56:02
  Speaker 6: So.
• 56:02
  Speaker 13: A hypersonic weapon is really the next generation of air
• 56:07
  Speaker 13: or ballistic missile threat that's facing friendly troops. If you
• 56:12
  Speaker 13: think about it from a speed perspective, hypersonic speeds are
• 56:15
  Speaker 13: really anything over the over about mock five, which is
• 56:18
  Speaker 13: five times a speed of sound. Think that highway speeds.
• 56:22
  Speaker 13: Your car moves about a mile, about a mile in
• 56:26
  Speaker 13: one minute. At mock five, you're talking about moving a
• 56:28
  Speaker 13: mile in one second. That's what a hypersonic weapon essentially is.
• 56:32
  Speaker 4: And I know that you wrote in a note that's
• 56:35
  Speaker 4: on the terminal about how it basically falls into two
• 56:39
  Speaker 4: broad categories. Can you kind of break down what two
• 56:41
  Speaker 4: categories are?
• 56:43
  Speaker 13: Sure? So, hypersonic weapons fall into one of two categories
• 56:47
  Speaker 13: as you as you mentioned, it's either a ballistic missile essentially,
• 56:50
  Speaker 13: think about a launcher with a big solid fuel rocket
• 56:54
  Speaker 13: on it that launches something into the atmosphere, whether it
• 56:56
  Speaker 13: be a space shuttle or something else, but it moves
• 56:59
  Speaker 13: into the atmosphere into outer space and essentially arcs in
• 57:03
  Speaker 13: a very ballistic sort of trajectory and then re enters
• 57:06
  Speaker 13: the atmosphere at incredible speeds. The space Shuttle or the
• 57:10
  Speaker 13: Apollo missions came back at almost mock twenty five if
• 57:13
  Speaker 13: you think about that. The second category of weapon is
• 57:16
  Speaker 13: really an air breathing jet powered engine, a type of
• 57:22
  Speaker 13: cruise missile. It uses what they call a scramjet, which
• 57:25
  Speaker 13: means you have to get this missile up to incredible
• 57:29
  Speaker 13: speeds like four mock five, and then it opens a
• 57:32
  Speaker 13: thrust an intake and then becomes hypersonic and accelerate up
• 57:38
  Speaker 13: to mock ten mock twenty five. If you watch the
• 57:40
  Speaker 13: Top Gun Maverick movie that Stump Works project, Maverick was
• 57:45
  Speaker 13: flying a hypersonic jet capable of movie at mock ten
• 57:48
  Speaker 13: or faster. So it hypersonic weapon falls into one of
• 57:51
  Speaker 13: those two categories, either something ballistic that leaves the atmosphere
• 57:54
  Speaker 13: and then comes back down or something that stays inside
• 57:57
  Speaker 13: the atmosphere and uses a scramjet power motor to really
• 58:02
  Speaker 13: move back.
• 58:02
  Speaker 1: All right, So if Russia is firing these things that
• 58:05
  Speaker 1: Ukraine can Ukraine shoot these things down?
• 58:09
  Speaker 13: Well, Ukraine apparently has shot down up to seven of
• 58:12
  Speaker 13: these early what I would call first generation hypersonic missiles.
• 58:16
  Speaker 13: And as we mentioned earlier, almost anything that can leave
• 58:20
  Speaker 13: the atmosphere travels at a hypersonic speed at a MOCK five.
• 58:23
  Speaker 13: And the Kinsol missile, which is what Russia has supposedly launched,
• 58:27
  Speaker 13: is capable of speed something between mock five and Mak ten.
• 58:31
  Speaker 13: And what we know is that those should be very
• 58:34
  Speaker 13: very hard to defend against with today's technology. But Ukraine
• 58:38
  Speaker 13: was successful in shooting that, we think up to about
• 58:40
  Speaker 13: seven of these in recent weeks.
• 58:42
  Speaker 4: So what does this Russian mag thirty one? So they're
• 58:45
  Speaker 4: basically carrying some of these missiles.
• 58:47
  Speaker 13: That's right. So Russia has a capability on it. Some
• 58:50
  Speaker 13: of its spider aircraft and some of its bombers to
• 58:53
  Speaker 13: carry air are essentially air to surface missiles, in this
• 58:57
  Speaker 13: case a cruise missile, and in this particular case, that Kinzal,
• 59:00
  Speaker 13: which we know is capable of achieving at least speeds
• 59:03
  Speaker 13: of mock five. And what we surmise at this point
• 59:06
  Speaker 13: in time is that Russia was targeting one of Ukraine's
• 59:10
  Speaker 13: Patriot air defense batteries, and so the missile was inbound
• 59:13
  Speaker 13: directly at that weapon system, and so it was a
• 59:16
  Speaker 13: nose to nose sort of a point defense weapon shot,
• 59:19
  Speaker 13: and the Patriot was successful in shooting this weapon down.
• 59:22
  Speaker 1: All right, Kevin, let's let's pull the focus out a
• 59:24
  Speaker 1: little bit and talk about you know, kind of arming Ukraine.
• 59:28
  Speaker 1: That's been you know, a long time for this war,
• 59:30
  Speaker 1: and there seems to be kind of a no end
• 59:32
  Speaker 1: to sit here. We seem to be the armory for Ukraine.
• 59:38
  Speaker 1: Can we still do that? Can we do that on
• 59:40
  Speaker 1: a long term basis? Can we continue to do that
• 59:42
  Speaker 1: and still meet our own defense needs?
• 59:47
  Speaker 11: I think so.
• 59:48
  Speaker 7: So.
• 59:48
  Speaker 13: We certainly still have a lot of inventory that's capable
• 59:51
  Speaker 13: of being moved from different theaters, whether it be the
• 59:54
  Speaker 13: European theater or the Asia Pacific theater to help Ukraine.
• 59:58
  Speaker 13: We can draw those down from US weapons style, or
• 1:00:00
  Speaker 13: we have the ability to potentially ramp up production of
• 1:00:03
  Speaker 13: the defense industrial base from the big defense companies. The
• 1:00:06
  Speaker 13: latter has been a concern as you know in recent months,
• 1:00:09
  Speaker 13: especially with Congress looking at the defense industrial base and
• 1:00:12
  Speaker 13: how do we maximize production Certainly, if we keep this
• 1:00:15
  Speaker 13: up for extended period of time, I think years will
• 1:00:19
  Speaker 13: draw down before we can replenish our inventories, and that
• 1:00:22
  Speaker 13: is a concern. But I think in the short term
• 1:00:25
  Speaker 13: to maybe eighteen months, that really won't be a very
• 1:00:28
  Speaker 13: acute problem for the Western militaries.
• 1:00:31
  Speaker 1: So, Kevin, the probably one of the big decisions that
• 1:00:33
  Speaker 1: the President made about Ukraine is sending over F Sixteen's
• 1:00:37
  Speaker 1: explain to us how that may play out in terms
• 1:00:40
  Speaker 1: of timing, how many aircraft they're pilots and what impact
• 1:00:44
  Speaker 1: you think that might have.
• 1:00:46
  Speaker 13: Yeah, great question. So I think there's two aspects of this.
• 1:00:48
  Speaker 13: One is whether the United States sends any of its
• 1:00:50
  Speaker 13: own F sixteens or from the Defense Industrial Base are
• 1:00:53
  Speaker 13: able to provide those to Ukraine. But the second thing
• 1:00:56
  Speaker 13: I think more importantly that the Biden administration recently did
• 1:00:59
  Speaker 13: is they sort of cleared the decks for action and
• 1:01:02
  Speaker 13: authorized our allies to provide S sixteens if they are
• 1:01:06
  Speaker 13: so inclined to Ukraine's defense. But before any of those
• 1:01:09
  Speaker 13: aircraft can really get there, the big thing that Ukraine
• 1:01:12
  Speaker 13: and the West has to do is start training Ukrainian
• 1:01:14
  Speaker 13: pilots on how to use those aircraft, and that could
• 1:01:17
  Speaker 13: take anywhere from several months for very proficient pilots just
• 1:01:22
  Speaker 13: kind of type model series training to convert them to
• 1:01:24
  Speaker 13: use Western equipment, to up to a year to eighteen
• 1:01:27
  Speaker 13: months to really get them proficient on how to use
• 1:01:29
  Speaker 13: those aircraft.
• 1:01:30
  Speaker 4: We only have about a minute left, but I was
• 1:01:32
  Speaker 4: curious about the supply chain threats that exist right now
• 1:01:35
  Speaker 4: when it comes to China and did coupling that's happening there.
• 1:01:39
  Speaker 13: Yeah, great question if you look at what's sort of happening,
• 1:01:42
  Speaker 13: whether you take the COVID pandemic and what we saw
• 1:01:45
  Speaker 13: in supply chains there, or how difficult it was from
• 1:01:48
  Speaker 13: Europe to kind of get off. Russian oil and natural
• 1:01:50
  Speaker 13: gas disruptions really have got the attention of the defense
• 1:01:55
  Speaker 13: industrial base, and what they're really looking to do is
• 1:01:58
  Speaker 13: how do you sort of do you risk your supply chains.
• 1:02:02
  Speaker 13: It's not a really good idea if you have a
• 1:02:06
  Speaker 13: potential foreign adversary or a foreign thread or somebody who's
• 1:02:09
  Speaker 13: geopolitically opposed your objectives to be over reliant upon them
• 1:02:13
  Speaker 13: for any source of supply, whether those be critical raw materials,
• 1:02:17
  Speaker 13: oil and natural gas. And so I think you're seeing
• 1:02:19
  Speaker 13: a very natural tendency right now for people to take
• 1:02:21
  Speaker 13: a look at where are they over concentrated and how
• 1:02:23
  Speaker 13: do I de risk that, How do I spread sort
• 1:02:26
  Speaker 13: of the wealth around so that I'm not beholding to
• 1:02:28
  Speaker 13: any one supplier in the future.
• 1:02:31
  Speaker 1: Kevin, thanks so much for joining us. I really appreciate
• 1:02:33
  Speaker 1: getting the benefit of your expertise. Kevin Brand defense policy
• 1:02:37
  Speaker 1: analysts for Bloomberg Intelligence and a twenty nine year Navy veteran.
• 1:02:42
  Speaker 1: So we thank Kevin for his many years of service
• 1:02:45
  Speaker 1: and he really helps us kind of understand what's happening
• 1:02:48
  Speaker 1: on the ground and in the air in the war
• 1:02:51
  Speaker 1: in Ukraine.
• 1:02:54
  Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
• 1:02:57
  Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
• 1:03:01
  Speaker 2: podcast platform you prefer. I'm Matt Miller. I'm on Twitter
• 1:03:05
  Speaker 2: at Matt Miller nineteen seventy three.
• 1:03:07
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• 1:03:10
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• 1:03:13
  Speaker 1: Bloomberg Radio.