Latest / Bloomberg Intelligence / Apple Makes the Right Move at the Right Time: Wedbush's Ives

Transcript

Apple Makes the Right Move at the Right Time: Wedbush's Ives · Bloomberg Intelligence

• 0:01
  Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
• 0:04
  Speaker 1: with my co host of Bonnie Quinn. Every business day
• 0:06
  Speaker 1: we bring you interviews from CEO, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Let's talk a little technology
• 0:21
  Speaker 1: to talk Apple, let's talk Uber And who better to
• 0:24
  Speaker 1: do that with than Dan Ives Dance and Managing director
• 0:27
  Speaker 1: for equity research at web Bush Securities. Uh, really one
• 0:30
  Speaker 1: of our go to voices on all things technology. Dance,
• 0:33
  Speaker 1: thanks so much for joining us here. Interesting news. I
• 0:35
  Speaker 1: just kind of read a news story just a couple
• 0:37
  Speaker 1: of minutes ago about Apple talking about bundling some of
• 0:41
  Speaker 1: their services here, what can you tell us about what's
• 0:44
  Speaker 1: actually going on with Apple and some of their services
• 0:47
  Speaker 1: businesses which are a key to the future of this company. Yeah,
• 0:50
  Speaker 1: and you hit the nail on the head in terms
• 0:52
  Speaker 1: of services being so significant. That's a sixty billion dollar
• 0:56
  Speaker 1: revenue stream next year. And I think the bundling, it's
• 0:59
  Speaker 1: just a massively smart move by Cooking Cupertino. I think
• 1:03
  Speaker 1: ultimately this could increase services revenues by another five to
• 1:06
  Speaker 1: seven percent. In terms of it's all that monetizing that
• 1:10
  Speaker 1: golden installed based That's what Apple is doing. They're very
• 1:14
  Speaker 1: similar many ways what Amazon done with the Amazon Prime.
• 1:19
  Speaker 1: What would they look like, because as I understand it,
• 1:22
  Speaker 1: you know, some of them are kind of bundled already.
• 1:25
  Speaker 1: Know you get like three or three months of this
• 1:27
  Speaker 1: if you you know, if you're subscribed to that, and
• 1:31
  Speaker 1: you know, maybe not exactly monthly bundling, but something similar. Yeah,
• 1:36
  Speaker 1: I think this is really take a step back if
• 1:39
  Speaker 1: you think about gaming, music, ultimately video you know, Apple
• 1:43
  Speaker 1: TV plus, you know, as well as potentially iCloud and
• 1:46
  Speaker 1: some other package services in there. I mean, as they
• 1:49
  Speaker 1: have continued to expand their offerings, they have more content
• 1:54
  Speaker 1: to sell and I think that's just going to increase
• 1:56
  Speaker 1: over time. And what this is really doing, it's putting
• 1:59
  Speaker 1: really more of a fence around their backyard, just monetized
• 2:02
  Speaker 1: the installation and ultimately pricing it. At points where media
• 2:06
  Speaker 1: consumer was not going to go for one or two
• 2:09
  Speaker 1: of the bundles like an Apple News, now they will,
• 2:12
  Speaker 1: and especially in the pandemic backdrop with the work from
• 2:16
  Speaker 1: home and many you know, continuing to to kind of
• 2:19
  Speaker 1: access things remotely. This is the right move at the
• 2:22
  Speaker 1: right time for them. Hey, Dan, I want to switch
• 2:24
  Speaker 1: gears a little bit and talk about just the gig
• 2:26
  Speaker 1: economy writ large week again. We got some jobless numbers today,
• 2:30
  Speaker 1: But thinking about Uber and California, UM California is talking
• 2:35
  Speaker 1: about I guess reclassifying some of those gig workers like
• 2:39
  Speaker 1: an Uber and Lifted drivers into employees. This is a
• 2:43
  Speaker 1: fundamental risk to these companies, isn't it. It's not just
• 2:49
  Speaker 1: the black cloud. It's really a future business model risk
• 2:52
  Speaker 1: to the overall gig economy with the Uber and Lift
• 2:55
  Speaker 1: frotain center, and it continues to be a head scratcher
• 2:58
  Speaker 1: for many you know, if you mean many of the
• 3:00
  Speaker 1: drivers that we've talked to you even over the last year,
• 3:04
  Speaker 1: they don't want to be employees. That's why they work
• 3:06
  Speaker 1: for Uber Uber itself. If they ever had to reclassify them,
• 3:10
  Speaker 1: that could be upwards a four to five million of
• 3:13
  Speaker 1: incremental costs per year. Obviously they're gonna fight through the
• 3:16
  Speaker 1: court system as well as in the ballot box. But
• 3:19
  Speaker 1: the fear is is in terms of what California is doing.
• 3:22
  Speaker 1: It's a Pandora's box situation where other states and cities
• 3:25
  Speaker 1: will file. Right now, we think VARs worsen the fight.
• 3:28
  Speaker 1: But if this continues down the road and ultimately Uber
• 3:31
  Speaker 1: that's why they might have to temporarily get out of California.
• 3:35
  Speaker 1: It's fascinating. Will it be a president for other companies?
• 3:38
  Speaker 1: You think? Well, I think when you think about gig economy,
• 3:42
  Speaker 1: that's the word because it's starts to ubern Live and
• 3:45
  Speaker 1: there's a cascading impact, and I think there's a lot
• 3:48
  Speaker 1: of unintended consequences here, which is part of the big
• 3:50
  Speaker 1: worry as California has gone down this head scratching route.
• 3:55
  Speaker 1: And when you think about the gay economy, you're talking
• 3:58
  Speaker 1: about something that's created millions of jobs and now many
• 4:01
  Speaker 1: of them could be at risk, even on the contractor
• 4:04
  Speaker 1: employee debate, and that continues to be a frustration, not
• 4:08
  Speaker 1: just for the companies but obviously for investors as right
• 4:11
  Speaker 1: now that continues to be the need to risk around
• 4:14
  Speaker 1: these names. Yeah, so it's interesting. I mean, I guess
• 4:17
  Speaker 1: the the argument there is clearly, hey, these folks are working,
• 4:20
  Speaker 1: but they're not getting benefits. For example, what's the what's
• 4:24
  Speaker 1: the argument from UH you know, the ubers and lifts
• 4:27
  Speaker 1: and the other gig companies. The argument is, if an
• 4:31
  Speaker 1: employee in the state of California's eye that wants to
• 4:36
  Speaker 1: work ten hours a week, what do they do? You know,
• 4:39
  Speaker 1: there's many of them. Like the flexible schedule might be
• 4:41
  Speaker 1: a second job, it might be actually income for a
• 4:44
  Speaker 1: student that's looking to save money for college. Stain. The
• 4:47
  Speaker 1: frustration from their perspective is the flexibility is the nature
• 4:52
  Speaker 1: of the driver model, and most drivers do not want that.
• 4:55
  Speaker 1: And that's that's ultimately the heart of the gig econ me,
• 5:00
  Speaker 1: which is why this is such a bewildering issue. Of Course,
• 5:03
  Speaker 1: at a time, in a once in a hundre your
• 5:05
  Speaker 1: pandemic where the gig economy, we believe, based on our
• 5:09
  Speaker 1: survey work of consumers will not get into an uber
• 5:14
  Speaker 1: or lift to a vaccines found just given safety issues.
• 5:18
  Speaker 1: Will there be consolidation among some of these types of
• 5:21
  Speaker 1: companies you know, Uber Lift, and of course you have
• 5:24
  Speaker 1: other companies in the gig economy competing too. I mean,
• 5:29
  Speaker 1: I think you will start to see some consolidation on
• 5:32
  Speaker 1: the smaller side. Uber and Wift, I think they go
• 5:35
  Speaker 1: about it alone. That's why profitability is so important, and
• 5:38
  Speaker 1: that's what we've talked about yesterday. But right now to
• 5:41
  Speaker 1: herculean but bill battle for many of these companies as
• 5:45
  Speaker 1: they get through this environment. I do believe on the
• 5:48
  Speaker 1: other side they will be able to navigate, but for
• 5:50
  Speaker 1: right now, this continues to be just a massive headwind
• 5:54
  Speaker 1: that they're facing down before we go. I have one
• 5:56
  Speaker 1: question for you. Of all of your companies in your
• 6:00
  Speaker 1: of the universe, the only underperform you have is on
• 6:02
  Speaker 1: Slack Technologies, which I would have thought might have been
• 6:04
  Speaker 1: doing pretty okay in this environment. Why own the performance?
• 6:08
  Speaker 1: Slack a great company, obviously work from home name. Our
• 6:14
  Speaker 1: biggest issue with Slack is the stocks had a great run.
• 6:17
  Speaker 1: I just think with Microsoft and Redmond and teens, that's
• 6:20
  Speaker 1: going to be a very difficult market for them to
• 6:23
  Speaker 1: further penetrates. They go after Microsoft, a great company. It
• 6:27
  Speaker 1: just comes down to, is a great company a great
• 6:29
  Speaker 1: stock at this valuation. That's why we're cautious at Slack
• 6:32
  Speaker 1: at these levels. I hear that, all right, and thank
• 6:36
  Speaker 1: you and thanks for being so open about that particular question.
• 6:39
  Speaker 1: I appreciated Don Ives, equity analysts at wed Bush Securities
• 6:43
  Speaker 1: joining us it is time for Bloomberg Opinion, and for
• 6:48
  Speaker 1: that now we bring in one of our favorite opinion columnists,
• 6:51
  Speaker 1: and Neil Ferguson, a senior fellow at the Hoover Institution
• 6:54
  Speaker 1: and of course Bloomberg columnist, among many many other roles
• 6:56
  Speaker 1: that he plays in society and has played over the
• 6:59
  Speaker 1: years in academia and elsewhere. His latest column is TikTok
• 7:03
  Speaker 1: is a super weapon in China's Culture War. Neil, thanks
• 7:07
  Speaker 1: for joining. I want to read out the first couple
• 7:10
  Speaker 1: of lines of your column. It's hard to get past
• 7:12
  Speaker 1: the initial share inality of TikTok. I spent half an
• 7:15
  Speaker 1: hour trying to make sense of the endless feed of
• 7:18
  Speaker 1: video snippets of ordinary people doing daft things with their
• 7:20
  Speaker 1: dogs or in their kitchens or in the gym. That's
• 7:23
  Speaker 1: the background. If TikTok is so inane, how has it
• 7:27
  Speaker 1: become such a cultural lever in the sense that it's
• 7:30
  Speaker 1: mobilized K pop fans to register for Donald Trump's Tulsa rally.
• 7:33
  Speaker 1: It's been a pandemic favorite and suddenly, as you say,
• 7:36
  Speaker 1: it's now got something to do with Cold War two.
• 7:40
  Speaker 1: That's right. Well on my initial reaction, As you can tell,
• 7:42
  Speaker 1: from the opening of the column was give me a break,
• 7:46
  Speaker 1: it's not serious. I did some some thorough research, as
• 7:50
  Speaker 1: a middle aged man should when confronted with an app
• 7:53
  Speaker 1: popular with the young. My kids and I got some
• 7:57
  Speaker 1: interesting feedback. My eight year old son said, Hey, check
• 8:00
  Speaker 1: out the Dancing Weasel, but my twenty one year old
• 8:04
  Speaker 1: son said, woe, it's it's toxic. I don't go near it,
• 8:07
  Speaker 1: and that was an interesting clue. I think the key
• 8:11
  Speaker 1: here is to recognize that this is a Chinese owned
• 8:14
  Speaker 1: app powered by artificial intelligence that is incredibly appealing and
• 8:20
  Speaker 1: indeed addictive to teenagers, and half of American teenagers have
• 8:25
  Speaker 1: used TikTok. When they use it, what they're doing is
• 8:30
  Speaker 1: essentially providing the app with data, and the app also
• 8:35
  Speaker 1: looks for other data about them. It doesn't just sit
• 8:38
  Speaker 1: there passively. We know from other reports that that TikTok
• 8:43
  Speaker 1: is pretty good, rather like Facebook getting data about users
• 8:47
  Speaker 1: from any source it can online. And so the key
• 8:50
  Speaker 1: argument here is that we've essentially created a portal are
• 8:54
  Speaker 1: allowed to be created, the portal through which young Americans
• 8:57
  Speaker 1: provide all kinds of personal data, potentially embarrassing even compromising
• 9:03
  Speaker 1: data to a Chinese controlled app. And the critical point
• 9:05
  Speaker 1: is that TikTok is owned by a Chinese company, byite Dance,
• 9:09
  Speaker 1: and any Chinese internet company is legally obliged to make
• 9:13
  Speaker 1: data all data available to the Chinese government, that is,
• 9:17
  Speaker 1: the Chinese Communist Party. And that's why this apparently silly
• 9:20
  Speaker 1: trivial app actually is a problem, and we can't simply
• 9:25
  Speaker 1: let it carry on the way it is, which is
• 9:28
  Speaker 1: essentially becoming the most popular app amongst amongst young Americans.
• 9:34
  Speaker 1: So neil I believe TikTok's response would be, hey, all
• 9:37
  Speaker 1: of the data is on servers. None of those servers
• 9:40
  Speaker 1: are in China. Um is that a valid kind of response. No,
• 9:46
  Speaker 1: it's not, because it doesn't really matter where the servers are.
• 9:50
  Speaker 1: If if she didn't, Pink calls up Uh and says, hey,
• 9:54
  Speaker 1: we want to check out data on X because bite
• 9:59
  Speaker 1: dance is compelled by Chinese law to to to comply,
• 10:04
  Speaker 1: then there would be no There would be no way
• 10:07
  Speaker 1: of their saying no. I mean, I think to be fair.
• 10:10
  Speaker 1: John J. Ming, who is the founder of bike Dance
• 10:13
  Speaker 1: and who had the vision to see TikTok's potential, you know,
• 10:17
  Speaker 1: he gets a lot of credit as an entrepreneur and visionary.
• 10:20
  Speaker 1: Facebook failed to make an app as good as this.
• 10:24
  Speaker 1: Facebook was trying to get video right, and it missed
• 10:26
  Speaker 1: the key point, which is that if you just let
• 10:30
  Speaker 1: users do the content and let the AI pick the
• 10:33
  Speaker 1: best content, you'll crush it. So you've got to give
• 10:36
  Speaker 1: him credit as an entrepreneur, and you should give him
• 10:38
  Speaker 1: credit also because I don't think personally he is an authoritarian.
• 10:42
  Speaker 1: But the reality is he's a Chinese citizen. It's a
• 10:45
  Speaker 1: Chinese company, the Chinese Communist Party. What's the data, It
• 10:48
  Speaker 1: doesn't matter where the servers are. And by the way,
• 10:51
  Speaker 1: you know TikTok says and it's user agreement that if
• 10:55
  Speaker 1: you hand over data then its parent company bike Dance
• 10:59
  Speaker 1: will have access the data. So they are open about that,
• 11:02
  Speaker 1: and now I think is the crux of the matter.
• 11:04
  Speaker 1: Although as you say, you know this has to be
• 11:06
  Speaker 1: seen in a broader context. I think I would be
• 11:09
  Speaker 1: less exercised about all this if it wasn't for the
• 11:11
  Speaker 1: fact that we know China is now engaged in a
• 11:15
  Speaker 1: pretty active campaign online and offline to exert influence in
• 11:21
  Speaker 1: American culture. Really the way the Russians did back in
• 11:24
  Speaker 1: twenty sixteen and We've seen active efforts by the Chinese
• 11:29
  Speaker 1: government on Twitter on other platforms too, so disinformation about
• 11:34
  Speaker 1: COVID nineteen. So this has to be seen in that context.
• 11:37
  Speaker 1: It's not as if the Chinese government is playing no
• 11:40
  Speaker 1: part in our culture war. It is actively involved in
• 11:44
  Speaker 1: trying to sow disinformation in American public discourse. Neil, we
• 11:49
  Speaker 1: finally have a tickets in Joe Biden, Kamala Harris. If
• 11:53
  Speaker 1: that turns out to be the next you know, inhabitants
• 11:57
  Speaker 1: of the White House and the of All Office, and
• 12:01
  Speaker 1: you know various wings of the West of the West
• 12:03
  Speaker 1: Wing and the East Wing, and so what have you.
• 12:06
  Speaker 1: What happens with the China relationship, Well, I think from
• 12:10
  Speaker 1: the vantage points of China, Biden presidency has become a
• 12:15
  Speaker 1: lot more repealing than a continuation of the Trump presidency,
• 12:19
  Speaker 1: because although Donald Trump started off trying to have a
• 12:22
  Speaker 1: close personal relationship with t and thing, since the trade
• 12:26
  Speaker 1: war started in ten things have gone rapidly downhill. And
• 12:30
  Speaker 1: I argued at the beginning of last year that we
• 12:34
  Speaker 1: were in Cold War two and we should, you know,
• 12:36
  Speaker 1: stop kidding ourselves. So I think from the Chinese vantage point,
• 12:39
  Speaker 1: they just want to get through to November three and
• 12:42
  Speaker 1: hope that that they get an altogether less hawkish president.
• 12:47
  Speaker 1: Kamala Harris is an interesting pick for Biden. I think
• 12:50
  Speaker 1: from the vantage point of the tech sector, it's a
• 12:53
  Speaker 1: kind of sigh of relief because although she's been known
• 12:56
  Speaker 1: for her pretty aggressive questioning on Congressional committe he is
• 13:00
  Speaker 1: in truth, I think she is as friendly a vice
• 13:03
  Speaker 1: presidential candidate a Silicon Valley could have hoped for. So
• 13:06
  Speaker 1: from that point of view, I think the risk of
• 13:08
  Speaker 1: aggressive antitrust and other actions probably goes down if Biden
• 13:13
  Speaker 1: Harris is the winning ticket. Neil, we just had the
• 13:16
  Speaker 1: president's call reporters into the Oval office and we will
• 13:18
  Speaker 1: could likely be hearing from him in a few moments.
• 13:20
  Speaker 1: But there is a headline now that there is an
• 13:23
  Speaker 1: historic deal to normalize relations between Israel and the United
• 13:28
  Speaker 1: Arab Emirates. I'm curious as to your thoughts about how
• 13:31
  Speaker 1: the Middle East will be reshaped, if at all, given
• 13:34
  Speaker 1: that Israel has this new normalized relationship apparently with the
• 13:38
  Speaker 1: United Arab Emirates. Well, this has been kind of cooking
• 13:42
  Speaker 1: quietly for a while. Most attention has been elsewhere, and
• 13:46
  Speaker 1: of course substantial sections the media are skeptical about the
• 13:51
  Speaker 1: President's Middle East policy and have been from the very outset,
• 13:54
  Speaker 1: But in reality, there's been a massive realignment in the
• 13:58
  Speaker 1: region in the last three and years, and I think
• 14:01
  Speaker 1: the Trump administration has done something at least to contribute
• 14:05
  Speaker 1: to that, the main alignment being but a whole bunch
• 14:08
  Speaker 1: of our countries, led by the U a E. Have
• 14:11
  Speaker 1: been looking to normalize relations with Israel and focus regional
• 14:17
  Speaker 1: security policy on Iran, which poses a threat not only
• 14:21
  Speaker 1: to Israel but two Sunni majority states. So I think
• 14:25
  Speaker 1: this is important and I think it actually is a
• 14:28
  Speaker 1: success for President Trump. That don't expect to read that
• 14:31
  Speaker 1: in the New York Times of the Washington Post this week.
• 14:34
  Speaker 1: Neil Ferguson, senior fellow at Hoover Institution and a Bloomberg
• 14:38
  Speaker 1: opinion calumnist. A m C right there reopening and it's
• 14:44
  Speaker 1: been a big story this morning. Mark Lazie the other
• 14:46
  Speaker 1: day talking about how he was looking at a MCS
• 14:48
  Speaker 1: secured debt. And that's what I want to start with
• 14:52
  Speaker 1: when I bring in Sally Bakewell, who's a corporate finance reporter,
• 14:55
  Speaker 1: because one of her stories in the last couple of days,
• 14:58
  Speaker 1: most of America is being shot out of the great
• 15:00
  Speaker 1: borrowing binge. Ever, and this is why Mark Lazie is
• 15:03
  Speaker 1: looking at the types of things like AMC secured debt. Sally,
• 15:07
  Speaker 1: tell us what exactly you mean by the fact that many,
• 15:11
  Speaker 1: many great companies are actually not able to borrow these days, Hi, Funnie. Yeah,
• 15:15
  Speaker 1: AMC is actually a really great example that you bring
• 15:18
  Speaker 1: up there, because like a number of companies airlines, hotels,
• 15:23
  Speaker 1: cruise lines, it's been absolutely devastated or it had been
• 15:27
  Speaker 1: devastated by the virus. The virus of course whites out
• 15:30
  Speaker 1: the revenue of it and many consumer facing companies UM.
• 15:35
  Speaker 1: And what they've been able to do, however, because they're
• 15:38
  Speaker 1: big companies that can tack the bond market is go
• 15:41
  Speaker 1: straight there and they've found willing invested to pay debt
• 15:45
  Speaker 1: because the debt markets have effectively been back stopped by
• 15:50
  Speaker 1: the vast kind of Federal reserve guerrilla UM and it's
• 15:55
  Speaker 1: pledged to use it near limitless balance sheet to buy
• 15:58
  Speaker 1: corporate bonds, and so that hasn't enabled all these companies
• 16:02
  Speaker 1: kind of almost without too much discrimination, all of them
• 16:06
  Speaker 1: have been able to hit the bond market. And we
• 16:09
  Speaker 1: saw another fantastic example of the kind of limitless nature
• 16:14
  Speaker 1: of it today with Apple, which is of course of
• 16:18
  Speaker 1: a great blue ship company that would lenders would fall
• 16:21
  Speaker 1: over themselves to Lento. But it's it's in the same
• 16:24
  Speaker 1: group of big companies. They can hit the bond market,
• 16:27
  Speaker 1: bond market no matter what, UM. But on the other
• 16:30
  Speaker 1: side of that, that kind of tremendous liquidity opportunity is
• 16:35
  Speaker 1: not mirrored for smaller firms, and that's how we're getting
• 16:39
  Speaker 1: the fact that they're missing out. Yeah. So sadly, the
• 16:41
  Speaker 1: smaller firms, mid sized firms, they depend less on the
• 16:44
  Speaker 1: capital markets, more on their local banks. Are are bank lenders,
• 16:49
  Speaker 1: and I guess they're being prudent saying, boy, in this pandemic,
• 16:53
  Speaker 1: I gotta be tighter on my credit standards. Is that
• 16:57
  Speaker 1: kind of what's happening here? Absolutely, that's what's happening. UM.
• 17:00
  Speaker 1: There was a recent loan officers survey of UM some
• 17:05
  Speaker 1: of the biggest banks where they found that loans have
• 17:08
  Speaker 1: been tightening at the fastest pace or at the most
• 17:12
  Speaker 1: since at least the financial crisis, and prices have gone
• 17:15
  Speaker 1: up to so for smaller companies, they can't access the
• 17:19
  Speaker 1: bond market, where this enormous amount of liquidity is squashing around, UM,
• 17:23
  Speaker 1: and it's harder for them to get loan. Now, on
• 17:26
  Speaker 1: the flip side, the Federal Reserve has come up with
• 17:30
  Speaker 1: these other lending programs. It has the main Street Lending program,
• 17:34
  Speaker 1: it has the Paycheck Protection program. But those have drawn
• 17:38
  Speaker 1: criticisms for being quite difficult to access, for being complex.
• 17:43
  Speaker 1: And actually, Paul, you raised that point. Banks don't necessarily
• 17:47
  Speaker 1: want to be involved in them because they don't feel
• 17:51
  Speaker 1: that they're being compensated for the risk of lending to
• 17:54
  Speaker 1: companies that potentially if you don't know if they will
• 17:57
  Speaker 1: be around in the next year, Sally, what happens to
• 18:02
  Speaker 1: these companies you just said they may not be around
• 18:04
  Speaker 1: in the next year. But there are also options like,
• 18:06
  Speaker 1: for example, going to quote unquote vulture investors. Right, yeah,
• 18:11
  Speaker 1: and that is another world, um, that we are seeing
• 18:14
  Speaker 1: varying degrees of activity. Um. Of course, there are all
• 18:19
  Speaker 1: the direct lenders, there are the distressed funds UM to
• 18:23
  Speaker 1: varying degrees. They are jumping in opportunities. But you know
• 18:26
  Speaker 1: that comes at the price too, So it's it's there
• 18:30
  Speaker 1: is money there, but you probably have to pay up
• 18:33
  Speaker 1: for it, um. And but a lot of firms a
• 18:36
  Speaker 1: lot of investors are definitely seizing on on that opportunity
• 18:41
  Speaker 1: as other lenders for trend so sally. This kind of
• 18:45
  Speaker 1: causing the question again the role of the bank, the
• 18:48
  Speaker 1: local bank. This is the time when their customers really
• 18:52
  Speaker 1: need them. What are the banks say they are? I
• 18:57
  Speaker 1: think they're a bit tied, because of course they have
• 19:01
  Speaker 1: to be more risk averse. They are building up their
• 19:05
  Speaker 1: lost provisions because they know what well they know that
• 19:09
  Speaker 1: we don't know, um what exactly is down the road.
• 19:13
  Speaker 1: And after the last financial crisis, which they were the
• 19:16
  Speaker 1: epicenter of, they of course have become a lot more
• 19:20
  Speaker 1: risk averse. Um. But then they are under this kind
• 19:24
  Speaker 1: of pressure from the Federal Reserve two, which is trying
• 19:27
  Speaker 1: to coax them to lend to these small and medium
• 19:29
  Speaker 1: sized firms, which is so important to the economy. And
• 19:32
  Speaker 1: of course you know it's it's important for banks too
• 19:35
  Speaker 1: that those firms thrive. Um. But I think you know,
• 19:38
  Speaker 1: when I was talking to people for this story, um,
• 19:41
  Speaker 1: they said, you know, if you're a good customer, um,
• 19:44
  Speaker 1: without too much risk, you know, people might banks don't
• 19:47
  Speaker 1: necessarily want to lend to you anyway. They want to
• 19:51
  Speaker 1: get the fees they want to get the sort of
• 19:55
  Speaker 1: you know, higher interest rates, so you know they're in
• 19:57
  Speaker 1: a tight spot for sure. Yeah, exactly, Sally Bakeball, thanks
• 20:00
  Speaker 1: so much for joining us. Really appreciate a fascinating story here. Again,
• 20:03
  Speaker 1: big companies like Apple and so on barring and historically
• 20:06
  Speaker 1: low rates, but a lot of small and midsized businesses
• 20:08
  Speaker 1: really finding it hard to get credit here in this pandemic,
• 20:11
  Speaker 1: so fascinating story. Sally Bakewell, corporate financial reporter for Bloomberg News. Well,
• 20:18
  Speaker 1: it is going to be a slightly different back to
• 20:20
  Speaker 1: school retail season this year, if it exists at all.
• 20:23
  Speaker 1: Let's ask somebody who has been following this and presumably
• 20:27
  Speaker 1: has some data and at least much much better informed
• 20:31
  Speaker 1: about what's going on out there than me. Arthur Zachowitz
• 20:34
  Speaker 1: is Women's Where Daily executive editor. Arthur, thank you so
• 20:37
  Speaker 1: much for joining us. What are you seeing this August
• 20:40
  Speaker 1: as we know approach what would have been a new
• 20:43
  Speaker 1: school year. Well, well, thanks for having me first. You know,
• 20:47
  Speaker 1: I think what we're seeing is a lot of uncertainty
• 20:49
  Speaker 1: and caution. Right, So, the National Retail Federation put ups
• 20:53
  Speaker 1: some of you know, kind of estimates on back to
• 20:56
  Speaker 1: school and they're looking at almost thirty four billion dollars
• 20:59
  Speaker 1: impact sales versus twenty six billion last year, and the
• 21:03
  Speaker 1: pulp bulk of that is is about ten billion in
• 21:05
  Speaker 1: online sales. But you know, honestly, you know, I think
• 21:08
  Speaker 1: that's kind of magical thinking, given you know what's occurring
• 21:11
  Speaker 1: in the market right now. Yeah, Arthur, I mean, do
• 21:13
  Speaker 1: we even have a sense of what percentage of KATE
• 21:16
  Speaker 1: through twelve students in the US will actually be going
• 21:19
  Speaker 1: back physically to school as opposed to remote learning? Yet again,
• 21:23
  Speaker 1: I know some parts of the South and the West
• 21:24
  Speaker 1: have actually and they have gone back to school, but
• 21:27
  Speaker 1: we have a sense of what percentage nationwide. Uh, you know,
• 21:30
  Speaker 1: I don't know that that's a great question. I know
• 21:32
  Speaker 1: that you know, there are plans in place in certain states, say,
• 21:35
  Speaker 1: you know, like New York, for example, has three different scenarios,
• 21:39
  Speaker 1: you know, with many of the schools, and they just decided,
• 21:41
  Speaker 1: you know, a couple of school districts in uh in
• 21:43
  Speaker 1: the Hudson Valley for example, just decided to do online only.
• 21:47
  Speaker 1: So we don't really know, and that's part of the uncertainty.
• 21:50
  Speaker 1: I think that you know, you're seeing Plus you know,
• 21:52
  Speaker 1: we heard I think New Roman may excuse me, new
• 21:55
  Speaker 1: brands said that they're a little um, you know, cautious
• 21:58
  Speaker 1: because the consumer's caution and just you know, as far
• 22:01
  Speaker 1: as like what to buy in the shopping lists haven't
• 22:03
  Speaker 1: even come through for a lot of school districts across
• 22:06
  Speaker 1: the country. So this uncertainty again in the market. What
• 22:10
  Speaker 1: runs are you hearing from that are very concerned about
• 22:13
  Speaker 1: their future? Arthur Well, I think, um, you know, we've
• 22:17
  Speaker 1: seen a lot of retail bankruptcies. Obviously, it seems like
• 22:19
  Speaker 1: every other day there's another retailer going out of business.
• 22:22
  Speaker 1: And and what's driving that is you know a lot
• 22:25
  Speaker 1: of you know, online sales and a reluctance like consumers
• 22:29
  Speaker 1: to go into physical stores. But you know, as far
• 22:32
  Speaker 1: as like who's gonna you know, play out the best
• 22:35
  Speaker 1: through the holidays and through you know, back to school,
• 22:38
  Speaker 1: I think Target is is well positioned, right, That's that
• 22:41
  Speaker 1: sort of that one stuff shop. You know that moms
• 22:44
  Speaker 1: feels comfortable you know, getting essentials, getting food, getting you know, apparel,
• 22:49
  Speaker 1: getting gifts. Uh, you know, they could go in and
• 22:51
  Speaker 1: out in a relatively you know, safe environment that they're
• 22:54
  Speaker 1: familiar with. But you know, everyone else this is a
• 22:57
  Speaker 1: challenging time. You know, if if you're not you know,
• 23:00
  Speaker 1: a brand that has a real strong connection to the consumer,
• 23:05
  Speaker 1: you're gonna have difficulties. I think moving forward, you know,
• 23:07
  Speaker 1: I think look look at Walmart recently label with their
• 23:10
  Speaker 1: guidance based on the uncertainty of back to school. So
• 23:14
  Speaker 1: you know, it's it's unclear as far as you know,
• 23:16
  Speaker 1: how this plays out in the future. Also, you know,
• 23:19
  Speaker 1: there's an interesting thing going all right, we have an
• 23:21
  Speaker 1: election year, which is creates uncertainty, right, we have the
• 23:24
  Speaker 1: pandemic which is ongoing. We have we're in a recession, right,
• 23:28
  Speaker 1: and then we have consumer anxiety on top of that.
• 23:30
  Speaker 1: So you know, it's a it's a perfect storm for
• 23:34
  Speaker 1: um creating shoppers who maybe want to be more frugal
• 23:37
  Speaker 1: and pull back on spending. So Arthur, what our parents
• 23:40
  Speaker 1: actually gonna be buying here in this back to school
• 23:42
  Speaker 1: is just just you know, mass and wipes and hand sanitizer. Sure,
• 23:48
  Speaker 1: because the safety it is first, right, So for the
• 23:50
  Speaker 1: kids going back, you know, it's still safety items, uh,
• 23:53
  Speaker 1: and you got to carry that stuff in something. So
• 23:55
  Speaker 1: I think backpacks, you know, you'll you'll see you know,
• 23:57
  Speaker 1: those traditional categories supposed to regular school supplies. You know,
• 24:01
  Speaker 1: as far as the peril is concerned. You know kids,
• 24:03
  Speaker 1: you know, if you're going physically back to school, they
• 24:05
  Speaker 1: tend that tends to come later. You know, they kind
• 24:07
  Speaker 1: of go into school and then they look, you know,
• 24:10
  Speaker 1: to see what everybody else is wearing and what the
• 24:12
  Speaker 1: trends are. And then they come back and you know
• 24:14
  Speaker 1: take mom uh either while online mostly and say I
• 24:18
  Speaker 1: want this, this and that, you know, and there's there's
• 24:20
  Speaker 1: some really interesting stuff going on right now. You know,
• 24:23
  Speaker 1: as far as like tweens. You know, I think Pup
• 24:25
  Speaker 1: Sugar Iss teams up with Old Navy. That's interesting. Um
• 24:29
  Speaker 1: Oshkosh Bagash is that you know that the the the
• 24:32
  Speaker 1: overall company, right, so they they're still being on in
• 24:34
  Speaker 1: twenty five years and they're launching a collection actually um
• 24:38
  Speaker 1: to red. You know they used to uh have adult stuff,
• 24:41
  Speaker 1: right so now they really introduced that so the whole
• 24:43
  Speaker 1: family could wear you know co uh you know cover rolls.
• 24:46
  Speaker 1: So that that's interesting. It's fun. But you know, um,
• 24:49
  Speaker 1: as far as like the staples are concerned, as far
• 24:51
  Speaker 1: as like apparel, you know, I think you'll see Nike
• 24:53
  Speaker 1: and um you know in brands that that offer active prayer,
• 24:57
  Speaker 1: uh and essentials too, like you know, shopping on targets
• 25:00
  Speaker 1: for example, you'll see printed T shirts as far as
• 25:03
  Speaker 1: you know from any brand really doing well. What about
• 25:07
  Speaker 1: the luxury brands? I mean, you know, and this wouldn't
• 25:10
  Speaker 1: just be for luxury customers. I mean put plenty of
• 25:12
  Speaker 1: youngsters out there, you know, save all you're just by
• 25:15
  Speaker 1: their yeasies or what. How do you you know that
• 25:17
  Speaker 1: the next drop will there still be drops for brands
• 25:20
  Speaker 1: like that? I think? So I think that that's going
• 25:23
  Speaker 1: to be a challenge because of all this uncertain it.
• 25:26
  Speaker 1: It's kind of a clouded market and it's everybody's getting bombarded, right,
• 25:30
  Speaker 1: so so things think about you, you've spent since last spring,
• 25:33
  Speaker 1: you know, hold up in your home with your family.
• 25:36
  Speaker 1: You've been bombarded with you know, a lot of director
• 25:39
  Speaker 1: consumer marketing firm brands themselves. So so how do you
• 25:42
  Speaker 1: cut through the clutter? You know? And the luxury brands,
• 25:45
  Speaker 1: you know, do that they have their loyal following. But
• 25:48
  Speaker 1: you know, there's a lot of research out there just
• 25:50
  Speaker 1: recently from uh, you know, de Lloyd and other companies
• 25:53
  Speaker 1: Adobe that kind of shows that that shop is particularly
• 25:56
  Speaker 1: you know, gen Z and millennials are have tried new
• 26:00
  Speaker 1: brands during COVID right, so they're moving away, so there's
• 26:04
  Speaker 1: a little bit less loyalty and because this stuck or
• 26:06
  Speaker 1: something they was stuck in behind, they were like, I'll
• 26:08
  Speaker 1: give that a shot. So if you'll luxury branding new
• 26:11
  Speaker 1: youth to that, yea, you know, I don't know. Arthur,
• 26:14
  Speaker 1: Thank you so much for joining us. We always appreciate
• 26:16
  Speaker 1: your thoughts into the retail space. Arthur Zechowitz, executive editor,
• 26:20
  Speaker 1: Woman's Where Daily, giving us his thoughts say, back to
• 26:22
  Speaker 1: school really key for retailers. A lot of uncertainty this year.
• 26:25
  Speaker 1: We'll see how it plays out for the retail space.
• 26:30
  Speaker 1: Thanks for listening to the Boomberg Markets podcast. You can
• 26:32
  Speaker 1: subscribe and listen to interviews at Apple Podcasts or whatever
• 26:36
  Speaker 1: podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter
• 26:40
  Speaker 1: at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter
• 26:42
  Speaker 1: at pt Sweeney. Before the podcast, you can always catch
• 26:45
  Speaker 1: us worldwide at Bloomberg Radio.