Latest / Bloomberg Intelligence / The Compelling Case For Front-Loading A 50bp Rate Cut

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The Compelling Case For Front-Loading A 50bp Rate Cut · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you
0:05
Speaker 1: along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
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Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. It is the blockbuster event of
0:23
Speaker 1: the week, of the month, possibly of the year. It
0:27
Speaker 1: is the Federal Reserve decision that will be announced at
0:29
Speaker 1: two pm, and more importantly, the two thirty pm press
0:33
Speaker 1: conference with FED Chair j Powell indicating perhaps how the
0:37
Speaker 1: Federal Reserve is thinking about future rate cuts. Joining us,
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Speaker 1: I'm so pleased to say is at Al Hassani. He's
0:43
Speaker 1: senior interest rate, rates and Currencies analyst for Columbia thread
0:46
Speaker 1: Needle Investments, which overseas nearly four hundred and sixty billion dollars.
0:51
Speaker 1: And thank you so much for being with us. What
0:53
Speaker 1: are you expecting from the Fed today? Great to be
0:57
Speaker 1: with you, so you know when the Fed decision and
1:00
Speaker 1: today I mean, let me just start by saying that
1:02
Speaker 1: the case for a frontloaded easing cycle. It's pretty aggressive,
1:07
Speaker 1: starting perhaps with the fifty basis point cut today is
1:10
Speaker 1: very compelling. And yet at the same time, on the
1:14
Speaker 1: from c UM, I would say this is pretty violent
1:16
Speaker 1: disagreement in terms of whether to proceed with something that aggressive. UM.
1:21
Speaker 1: So I think the base case has to be a
1:23
Speaker 1: basis point cut with some guidance in terms of UH
1:27
Speaker 1: cuts later on this year as well. But in my mind, again,
1:30
Speaker 1: the case for frontloading and being quite aggressive at this
1:34
Speaker 1: stage is very compelling. So at your case again, your
1:38
Speaker 1: case for more aggressive frontloading of interest rates maybe fifty
1:41
Speaker 1: basis points today, UM, what's that predicated upon? Because it
1:45
Speaker 1: seems like some of the cyclical data that we're getting
1:47
Speaker 1: recently is actually pretty decent, whether it's UH jobs or
1:51
Speaker 1: you know, other the consumer seems pretty strong. Yeah, And look,
1:55
Speaker 1: and I want to acknowledge that there there there's basically
1:58
Speaker 1: two buckets. A factor is driving this decision. There's the
2:02
Speaker 1: cyclical factors UH, which really kind of focus on some
2:06
Speaker 1: of the shorter term data that we've had come through
2:08
Speaker 1: over the past six months. There's obviously a manufacturing stall,
2:11
Speaker 1: there's a slowdown globally UH, you know, quite pronounced in
2:15
Speaker 1: in Europe that was confirmed by GDP data today. Obviously
2:18
Speaker 1: a slowdown in in China and Asia and more broadly uh,
2:22
Speaker 1: and weakness in domestic capex. Uh. The labor market in
2:25
Speaker 1: the US looks relatively healthy, but there as well, we're
2:29
Speaker 1: seeing on the margin weakness versus where we were last year.
2:33
Speaker 1: And you see that pretty clearly in in in wages,
2:36
Speaker 1: wage growth has stagnated or on three and you see
2:39
Speaker 1: that being confirmed by the employment cost in next day
2:41
Speaker 1: as well. So there's some short term data that I
2:44
Speaker 1: would say has weakened. And if you if you focus
2:47
Speaker 1: in in terms of data flow over the past six weeks,
2:50
Speaker 1: you can feel a little bit more optimistic. Uh. Like
2:52
Speaker 1: you said, labor market is okay. Uh. Confidence both in
2:55
Speaker 1: terms of consumer confidence and business confidence is pretty solid. Um.
3:00
Speaker 1: And the household sector in general has been very healthy,
3:03
Speaker 1: and that's been true for for a number of years now.
3:05
Speaker 1: So UM, go ahead, But I was gonna say that,
3:09
Speaker 1: you know, the structural reason is really a risk management reason.
3:14
Speaker 1: From perspective, real rates remain quite low, uh, and yet
3:19
Speaker 1: we are significantly above real rates in the rest of
3:22
Speaker 1: the world. Uh. That's a dynamic that's unlikely to be sustainable.
3:26
Speaker 1: So while real rates are coming down, growth continues to decelerate. UM.
3:32
Speaker 1: Whether our potential is somewhere between one and a half
3:34
Speaker 1: and one seventy five, we're we're going to that level
3:38
Speaker 1: um and the margin for error for the FAD is shrinking.
3:43
Speaker 1: And we see what happens when that margin disappears in
3:47
Speaker 1: terms of outcomes in Europe and Japan. And that's a
3:49
Speaker 1: place we we desperately don't want to be. So here's
3:52
Speaker 1: here's my concern actually with all of this is that
3:56
Speaker 1: ultimately this comes down to a currency play, because if
3:59
Speaker 1: this is a relative value game with respect to the
4:01
Speaker 1: rest of the world, it comes down to weakening the
4:04
Speaker 1: dollar uh and and thus lowering yields. Here and I'm wondering,
4:08
Speaker 1: I mean, is that the ultimate goal sort of implicitly
4:12
Speaker 1: of the Federal Reserve at this point? I know how
4:15
Speaker 1: much put back against that a little bit in the
4:18
Speaker 1: sense that the currency sensitivity of the U. S economy
4:22
Speaker 1: is actually quite low. The pass through of the currency
4:26
Speaker 1: into inflation is quite low. Obviously it has a it
4:30
Speaker 1: has a short term impact. But as we've seen, the
4:32
Speaker 1: dollar has strengthened uh and as weekend has gone through
4:36
Speaker 1: cycles over the course of the past decade, and the
4:39
Speaker 1: pass through and the impact of inflation is marginal. Although
4:43
Speaker 1: although that said, a lot of people say that the
4:45
Speaker 1: reason why yields on on U S treasury treasuries are
4:50
Speaker 1: so high relative to the rest of the world is
4:53
Speaker 1: only because of the FED, and frankly because the FED
4:56
Speaker 1: is in a raising cycle or has been. UM that
5:01
Speaker 1: has kept the dollars stronger, and the hedging costs have
5:04
Speaker 1: been higher, and the hedging costs will come down if
5:07
Speaker 1: the FED cuts, and that will draw more foreign investors
5:10
Speaker 1: back into US UH assets, and then we'll just lower
5:14
Speaker 1: the rates substantially. I mean, do you buy that argument?
5:18
Speaker 1: I don't think so. I mean, like the curve has
5:21
Speaker 1: flattened as the set has heighted, so the feeds ability
5:24
Speaker 1: to impact the longer end of the curve has been
5:27
Speaker 1: relatively muted. Um. This is this is I think quite
5:31
Speaker 1: similar to hikes that we saw in the nineties and
5:34
Speaker 1: the two thousand's right, So we have the curve flatten. Um.
5:38
Speaker 1: The hedging cost issue, UH, I think you're right of it,
5:42
Speaker 1: but but it's I think it's much more relevant for
5:45
Speaker 1: risk assets in the US. If you think about foreign
5:48
Speaker 1: demand for risk assets and the fact that you know,
5:51
Speaker 1: about half of fixed income outside of the US now
5:57
Speaker 1: yields below zero. There's obviously robust demand for US risk
6:02
Speaker 1: UH from Europe, from Japan, from the broader Asian complex,
6:06
Speaker 1: and high hedging costs have kept some of those buyers
6:09
Speaker 1: on the sidelines. UM. At the same time, it's not
6:13
Speaker 1: the Fed's job to manage hedging costs for international investors. UM.
6:19
Speaker 1: That's that's a byproduct of what they're trying to do here.
6:22
Speaker 1: That's the book. It's not in their band aid book.
6:26
Speaker 1: I mean, um, um look at it. It's a fairy
6:29
Speaker 1: thing to say. UM. If we zoom out a little bit,
6:32
Speaker 1: Foreign demand for treasuries, for example, has diminished, and it's
6:36
Speaker 1: been in structural decline over the past five years, but
6:40
Speaker 1: domestic demand has stepped in and we're really not seen
6:44
Speaker 1: any impact of that on the long end of the curve,
6:47
Speaker 1: despite the fact that issuance has increased obviously due to
6:50
Speaker 1: the deficits and demand. Foreign demand has stepped back UM.
6:55
Speaker 1: And as a thought experiment, I would say this, if
6:57
Speaker 1: we didn't have this fiscal um um SURPLUSA and the
7:04
Speaker 1: fiscal deficit of the last several years, UH, US long
7:08
Speaker 1: end rates would be substantially below where they are today,
7:12
Speaker 1: and that should be very worried for the Fed. UM.
7:15
Speaker 1: It means we would be much closer to where Germany
7:17
Speaker 1: is today. UM. And that's again a reflection of our
7:21
Speaker 1: growth and inflation dynamics rather than anything that the set
7:25
Speaker 1: is trying to do. Ed Al Hussini, thank you very much.
7:28
Speaker 1: Ed is a senior interest rate uh IN currency analyst
7:31
Speaker 1: at Columbia thread Needle Investments, based in Minneapolis. Well Apple
7:50
Speaker 1: reported some pretty decent results, better than expected for its
7:53
Speaker 1: fiscal third quarter fourth quarter forecast, also a little bit
7:56
Speaker 1: better and expected than looking at the stock here on
7:58
Speaker 1: the Bloomberg terminal, up about four points re percent today,
8:00
Speaker 1: up about thirty for the year, so investors certainly liked
8:03
Speaker 1: what they heard there. They'll us break it down a
8:05
Speaker 1: little bit. We welcome back our good friend Lauren Martin.
8:07
Speaker 1: She's a senior analyst that need him in company. She
8:09
Speaker 1: joins us live here in a Bloomberg eleven three oh studio. Laura,
8:12
Speaker 1: thanks so much for being with us. Key takeaways from Apple.
8:16
Speaker 1: You have a strong buy on the stuff we do.
8:17
Speaker 1: It's our one strong by name, it's our top pick
8:19
Speaker 1: for this year, UM, And what I would say is this,
8:22
Speaker 1: I think the three most important metrics that drive Apples
8:25
Speaker 1: upside are the number of installed based unique users, and
8:29
Speaker 1: then um the actual revenue per user, and then how
8:32
Speaker 1: long they stay in the Apple ecosystem, which generates this
8:35
Speaker 1: lifetime value per user. And what you saw yesterday from
8:39
Speaker 1: their earnings, which was so important, was that they hit
8:41
Speaker 1: all time highs in every product, which means the installed
8:44
Speaker 1: basis growing. The penetration per unique we think there's nine
8:48
Speaker 1: and fifty unique users. The penetration is now one point
8:51
Speaker 1: six products per user, up from one point five a
8:55
Speaker 1: year ago, so they're getting deeper penetation of products. And
8:58
Speaker 1: finally we're getting we have four four hundred and twenty
9:01
Speaker 1: million subscriptions, up from three sixty ninety days ago and
9:06
Speaker 1: up from three twenty ninety days before that. All of
9:08
Speaker 1: which said, and that lowers churn, because every time somebody
9:11
Speaker 1: subscribes to a service, it lowers your churn, which elongates
9:15
Speaker 1: the amount of time someone stays in the ecosystem. Coming
9:18
Speaker 1: on that, looking forward as the next catalyst, we have
9:21
Speaker 1: the Arcade service coming, we have the card coming. Apple
9:26
Speaker 1: Pay is getting more widely used they're going to try
9:28
Speaker 1: to add services that displace other services in the market,
9:32
Speaker 1: which is one of the reasons Spotify is correcting today.
9:34
Speaker 1: And all of that should lower churn, which makes the
9:37
Speaker 1: lifetime value per customer go up, both because they're in
9:41
Speaker 1: the ecosystem longer and because they're spending more money on
9:43
Speaker 1: new services. Although some people would argue that they're trying
9:47
Speaker 1: to shift their focus to a services company and yet
9:50
Speaker 1: their services revenue came in below expectations, So what's sort
9:56
Speaker 1: of your reasoning behind why that's okay? So I think
9:59
Speaker 1: I think the important point for me anyway, is that
10:02
Speaker 1: services has a seventy percent profit margin and product has
10:05
Speaker 1: a thirty percent profit margin. So I think an interesting
10:08
Speaker 1: frame way to frame Apple is razor, razor blade. Let's
10:11
Speaker 1: give a loss leader on the product. Okay, it's a
10:14
Speaker 1: thirty percent margin, not a loss like a razor, And
10:16
Speaker 1: then what you're really selling is the seventy percent margin services.
10:19
Speaker 1: So every time they tell you they're adding a new
10:21
Speaker 1: seventy a new service, that's another new green field of
10:26
Speaker 1: adding a seventy percent margin. So to me, that's the
10:29
Speaker 1: more important point here, because that's like a supercharger for
10:33
Speaker 1: the Ebat dog growth and the stock trades on a
10:35
Speaker 1: pe and it trades at fifteen times earnings and it's
10:39
Speaker 1: going to grow seventeen percent, which means you're buying this
10:41
Speaker 1: stock at a PEG ratio of nine point nine zero
10:44
Speaker 1: point nine, meaning below one. Even though it's now the
10:48
Speaker 1: biggest company on Earth. It's has a nice growth now
10:50
Speaker 1: they've got When when the China trade issues flared up,
10:53
Speaker 1: Apples certainly got hit. It was highlighted as one of
10:56
Speaker 1: those companies that's really exposed. They sell a lot of
10:58
Speaker 1: product in China, they manufacture a product in China. Did
11:01
Speaker 1: there have anything last night on the conference call to
11:03
Speaker 1: talk about kind of how they viewed China. Yeah, so,
11:06
Speaker 1: I mean I sort of thought one of the things
11:08
Speaker 1: that came out of last night's call was they've sort
11:09
Speaker 1: of solved China. And what they said was they had
11:12
Speaker 1: to lower price for sure because the US dollar has
11:15
Speaker 1: been so strong, but they said that the Chinese consumer
11:17
Speaker 1: has not had a negative reaction to American products, which
11:21
Speaker 1: was something we're super worried about. That the Chinese government
11:24
Speaker 1: had become much more aggressive at stimulating the consumer economy,
11:27
Speaker 1: so they were getting more acquisitions of in China of
11:30
Speaker 1: iPhones UM, and that the trade talks. You saw that
11:34
Speaker 1: the the administration said they were constructive. The China trade
11:37
Speaker 1: talks were constructive today UM, so that all of that
11:40
Speaker 1: sounds like China might be solved at least for the
11:43
Speaker 1: near term. And it definitely was a driver of Apple's
11:46
Speaker 1: unit upside in the quarter. I want to shift gears
11:49
Speaker 1: a little bit as we head into the second half
11:51
Speaker 1: of this earning season and go back and look at
11:54
Speaker 1: some of the ones that came out earlier. Netflix reporting
11:57
Speaker 1: on July sevente July eighteenth, and they showed that they
12:01
Speaker 1: lost subscribers. It was a big disappointment. You saw the
12:04
Speaker 1: shares decline substantially. I'm wondering what your view is here.
12:08
Speaker 1: Is this a buying opportunity? We would say no. I
12:11
Speaker 1: mean our thesis is that UM subscriber losses in the
12:15
Speaker 1: US is the new normal. Uh. They raised price, which
12:19
Speaker 1: is what drove the subscriber losses in the June quarter.
12:22
Speaker 1: But starting on November twelve, you're gonna get the Walt
12:24
Speaker 1: Disney Company coming in UM with a new competitive enter
12:27
Speaker 1: at half the price. It's going to be seven dollars
12:30
Speaker 1: versus Netflix is now you know, sort of twelve to
12:33
Speaker 1: fourteen dollars, and um, you're gonna have every movie that
12:37
Speaker 1: Disney's ever made in that service for seven dollars, from Lucasfilm,
12:42
Speaker 1: from Marvel, from Pixar, and from Disney Animation like Frozen.
12:45
Speaker 1: So every big film they've ever made in fifty years
12:47
Speaker 1: will be on that service, watchable fifteen times by your
12:51
Speaker 1: twelve year old girl if they want to. So I
12:54
Speaker 1: think you're gonna get trial. What we saw from Game
12:57
Speaker 1: of Thrones is that so long as Game of Thrones
12:59
Speaker 1: was on, Peep will subscribe and paid fifteen dollars for HBO,
13:02
Speaker 1: and they had stopped paying for Netflix. Then Game of
13:05
Speaker 1: Thrones ended, they went back to Netflix. So it's gonna
13:08
Speaker 1: happen is people are going to turn off Netflix and
13:10
Speaker 1: spend seven dollars buying Disney, and when they finished watching
13:13
Speaker 1: all those movies, Disney's challenge will be to transport them
13:17
Speaker 1: to the Fox programming, which is more TV series. Otherwise
13:20
Speaker 1: they're going to go back to Netflix. But meanwhile, it's
13:21
Speaker 1: going to be a hellish three months six months for
13:24
Speaker 1: Netflix U S subscriber subs as people go over to
13:27
Speaker 1: Disney and and sort of rewatch all those great movies.
13:30
Speaker 1: So one of the things we've also seen, as it
13:31
Speaker 1: relates to Netflix and a lot of the traditional media companies,
13:34
Speaker 1: which you've covered for a long time, law, is a
13:36
Speaker 1: lot of the media companies are bringing some of their
13:37
Speaker 1: content that they had been licensing to Letflix bringing back
13:41
Speaker 1: because they are launching their own service, whether it's Disney
13:43
Speaker 1: or Comcast or NBC, you know all those folks. How
13:47
Speaker 1: big of the risk is that for Netflix losing some
13:50
Speaker 1: of that content. Yeah, I mean, I think it's a
13:52
Speaker 1: I think it's a risk because the value proposition is
13:55
Speaker 1: getting worse because they used to have The Office and
13:58
Speaker 1: they used to have Friends, and those were two of
14:00
Speaker 1: their highest rated shows or viewed shows. And now those
14:03
Speaker 1: are leaving and they're splitting up. One's going to Warner
14:05
Speaker 1: and one's going to NBC. So what's about to happen
14:08
Speaker 1: to the consumer is he's going to have five choices
14:10
Speaker 1: where it used to all be aggregated for a ten
14:12
Speaker 1: dollars a month under Netflix, which was an awesome value proposition.
14:16
Speaker 1: So what the consumer is going to have to do
14:17
Speaker 1: now is figure out which services he wants. And so
14:20
Speaker 1: we're gonna have this chaotic period of sort of open,
14:23
Speaker 1: free for all competition for let's say three to five years,
14:26
Speaker 1: but at the end of five years, consumers are all.
14:29
Speaker 1: The research shows that consumers are going to take three
14:31
Speaker 1: of these big entertainment services, probably including a spinning bundle
14:34
Speaker 1: or the big bundle, plus a couple O t t s.
14:37
Speaker 1: So the consumer will decide and it will be winner
14:38
Speaker 1: take all, and then whoever wins, they'll have to license
14:42
Speaker 1: the contract for the guy who went out of business.
14:44
Speaker 1: Who are the three winners? So I think the three
14:47
Speaker 1: I think Disney wins because they're big, they got a
14:49
Speaker 1: balance sheet, and they bought Fox to do this for
14:51
Speaker 1: seventy billion to do this, so they're really all in
14:53
Speaker 1: on this name. I think at biggest risk is Warner
14:56
Speaker 1: because they have to price that HBO product above fifteen
14:59
Speaker 1: dollars and so they're going to throw the turner stuff
15:01
Speaker 1: in UM and so you know, we'll see if they
15:04
Speaker 1: can market around that high price point, because that is
15:07
Speaker 1: at the Netflix price point. I think Netflix loses. It's
15:10
Speaker 1: already has to raise three point five billion a year.
15:12
Speaker 1: It doesn't have the balance sheet withstand a fight. And
15:14
Speaker 1: I gotta tell you if you're if you're a T
15:17
Speaker 1: and T, Warner Brothers or Disney or Comcast, the NBC Universal.
15:22
Speaker 1: You can lose money for ten years on this. It
15:24
Speaker 1: doesn't matter. Netflix cannot. Laura Martin really interesting points. Thank
15:29
Speaker 1: you so much for being here with us, My pleasure.
15:31
Speaker 1: Laura Martin is senior analyst at Needham and Company. Joining
15:34
Speaker 1: us here in our interactive broker studios. The earnings parade
15:53
Speaker 1: continues this week, in particular for the autos sector. Christ
15:58
Speaker 1: Are reported earlier today General Oters tomorrow. Joining us here
16:01
Speaker 1: in our interactive broker studios as Craig Trudell, us Autos
16:05
Speaker 1: team leader for Bloomberg News. So, Craig, before we get
16:08
Speaker 1: started into digging into some of the results we've gotten,
16:10
Speaker 1: because we've already gotten forward, Um, let's just talk about
16:14
Speaker 1: where we are in this secular decline of the auto industry.
16:18
Speaker 1: How low our expectations going into this earnings period. Well,
16:22
Speaker 1: we so we started the year with an expectation that
16:24
Speaker 1: we would tread water on a global perspective. So so
16:28
Speaker 1: the US market is sort of was sort of widely
16:31
Speaker 1: expected to start to decline. Uh, there was sort of
16:35
Speaker 1: a false positive last year of of sales being up
16:39
Speaker 1: just a smidgeon, but it was mostly driven by the
16:42
Speaker 1: fact that the car makers were selling a lot more
16:45
Speaker 1: to rental fleet companies and and it was you know,
16:48
Speaker 1: not really actually a strong year from a retail perspective.
16:52
Speaker 1: Relative to the last couple of years. We've seen a
16:56
Speaker 1: continuation of retail weakness and uh you know, uh sort
17:00
Speaker 1: of a move on the part of the car makers
17:02
Speaker 1: to sort of pad the numbers by selling more to fleets. Uh.
17:05
Speaker 1: In Europe, the market is deteriorating, especially in the in
17:09
Speaker 1: the last month. I think it sort of caught people
17:12
Speaker 1: off guard a little bit just how much weakness has
17:15
Speaker 1: has been over there. But the big, big story has
17:17
Speaker 1: been China. There was an expectation that the government would
17:21
Speaker 1: step in, as they have so often uh over the
17:25
Speaker 1: years when the auto market there has shown sign of
17:28
Speaker 1: of signs of weakness, you've seen uh state support to
17:32
Speaker 1: kind of you know, keep the market growing, and we
17:35
Speaker 1: haven't seen that. And we've seen China really, um, you know,
17:38
Speaker 1: continue to deteriorate. And so you know, a lot of suppliers,
17:42
Speaker 1: a lot of O. E M s are talking about
17:43
Speaker 1: the idea that you know, they were entering this year thinking,
17:47
Speaker 1: you know, the global industry would be you know, roughly
17:50
Speaker 1: treading water, when in fact it's it's down roughly about
17:53
Speaker 1: five percent. It's looking like for this year down five
17:56
Speaker 1: percent globally. So we've got Fiat Chrysler Um numbers and
18:00
Speaker 1: stocks up four percent. What do we what are the
18:02
Speaker 1: key takeaways there? So with f c A, the the
18:05
Speaker 1: big big story is trucks here in the US. So
18:08
Speaker 1: they've they've taken Ram truck. Yeah, Ram ram is you
18:14
Speaker 1: know please ram Is. Ram is really cutting the checks
18:19
Speaker 1: in Detroit. So uh. They they've got a new Ram
18:23
Speaker 1: Ram pickup that is really doing well. They also have
18:26
Speaker 1: this sort of dual strategy of they've they've continued to
18:29
Speaker 1: make the outgoing generation version of the Ram. Uh. They
18:32
Speaker 1: actually announced today that they're going to sort of continue
18:35
Speaker 1: that two pronged strategy of being able to offer the newer, uh,
18:38
Speaker 1: you know, more expensive, higher margin, you know, lucrative truck
18:42
Speaker 1: uh that that has been really successful. They've put a
18:45
Speaker 1: massive touch screen into that pickup that has you know,
18:48
Speaker 1: surprisingly gone over extremely well with with truck buyers. But
18:52
Speaker 1: they also have this older generation truck that's a little
18:55
Speaker 1: bit more for the budget buyer, and they're giving GM
18:58
Speaker 1: a real run for their money in terms of the
18:59
Speaker 1: pick up market here in the US. And that's huge
19:01
Speaker 1: for profitability, which brings us to General Motors, which reports tomorrow.
19:05
Speaker 1: Ford reported last week shares plunged seven and a half
19:10
Speaker 1: percent the day that they reported, so not a great
19:13
Speaker 1: day for Ford. Are we going to see a similar
19:15
Speaker 1: type of disappointment from motors? From what analysts are saying,
19:19
Speaker 1: given the fact that Fiat Chrysler might be taking away
19:22
Speaker 1: some of their market share, the key for them is
19:24
Speaker 1: going to be trucks. So so they too have a
19:27
Speaker 1: new pickup on the market. They for who is Truck's
19:30
Speaker 1: not the key? Everybody in Detroit. It's everybody. I mean,
19:34
Speaker 1: it's it really is still the story is It sort
19:37
Speaker 1: of feels like, you know, it feels like a broken
19:40
Speaker 1: record talking about Detroit and pickups. But it remains to be.
19:43
Speaker 1: It remains the case, despite all of this hype about
19:46
Speaker 1: electrification and autonomous vehicles, that is still what pays the
19:49
Speaker 1: bills around a town in Detroit. Uh, they have a
19:53
Speaker 1: new pickup as well. They've they've had a lot slower
19:57
Speaker 1: a ramp for that vehicle than than Fiat cry Sler has. UH.
20:01
Speaker 1: And whether or not. They're able to sort of resolve that,
20:04
Speaker 1: you know, work out the kinks of of getting that
20:06
Speaker 1: new truck onto the market and and sort of help
20:09
Speaker 1: the bottom line. That's important And for GM an important
20:12
Speaker 1: factor too is they got out of Europe a couple
20:15
Speaker 1: of years ago, so they're dodging the recent market weakness
20:18
Speaker 1: over there. Uh, the sort of impending doom that is
20:22
Speaker 1: being warned warned about in terms of the stricter emission
20:26
Speaker 1: standards over there. So GM has really sort of, uh,
20:29
Speaker 1: you know, said, you know what, we're we're out of here.
20:31
Speaker 1: They sold opal To to p s A a couple
20:34
Speaker 1: of years ago and that's no longer a concern for them.
20:37
Speaker 1: So that being said, China's weakness is a big deal
20:40
Speaker 1: for them. They are huge in that market and they're
20:42
Speaker 1: feeling feeling the pain just like everybody else. All right, now,
20:45
Speaker 1: we're gonna get to what I really want to talk about,
20:47
Speaker 1: which is Elon Musk tweeting production numbers. I thought he
20:51
Speaker 1: had an agreement with the SEC not to do that.
20:54
Speaker 1: I thought so too, uh, you know, And in the past,
20:56
Speaker 1: we've we've heard, we've seen him, you know, talking about
20:59
Speaker 1: car earlier this week it was it was about the
21:03
Speaker 1: solar roof which, uh in and of itself, was already
21:06
Speaker 1: a very controversial product. He showed that a couple of
21:08
Speaker 1: years ago really to sort of seal the deal on
21:11
Speaker 1: on buying Solar City, which everyone uh you know knows
21:14
Speaker 1: as as being a pretty controversial uh merger. Um. He
21:19
Speaker 1: talked about, you know, sort of towards the end of
21:21
Speaker 1: this year, his hope for how many of those roofs
21:25
Speaker 1: he's going to be able to make. He's had real,
21:28
Speaker 1: real trouble actually just sort of you know, getting production
21:31
Speaker 1: going whatsoever on that product comes out and says a
21:35
Speaker 1: thousand a week by the end of this year. That's
21:38
Speaker 1: not anywhere you know there. There hasn't been any forecast
21:41
Speaker 1: whatsoever from the company from that perspective, and the amended
21:45
Speaker 1: language that Tesla that Musk and the SEC agreed to
21:49
Speaker 1: earlier this year specifically said production numbers that the company
21:53
Speaker 1: has not been communicated previously. He needs pre approval to
21:56
Speaker 1: to post about that, and Tesla has not said whether
22:00
Speaker 1: or not he got that approval. So all right, I mean,
22:02
Speaker 1: I'm amazed that you're surprised. This is this give me him.
22:08
Speaker 1: It's funny the stocks not moving because nobody else's was
22:12
Speaker 1: going to change. Sorry, I just I was hoping that,
22:15
Speaker 1: you know, the Securities and Exchange Commission in the United
22:17
Speaker 1: States might have to be able to you like watching
22:21
Speaker 1: a train wreck. Craig Trudell, thank you so much for
22:23
Speaker 1: joining us US Autos team leader for Bloomberg News. Joining
22:27
Speaker 1: us here on Interactive Broker Studio. Craig and the team,
22:30
Speaker 1: they do a great job covering the global auto industry
22:33
Speaker 1: for Bloomberg News. I've never seen ball this red before.
22:52
Speaker 1: I'm so excited for this conversation. We're gonna be talking,
22:55
Speaker 1: but it's a very serious conversation. It's about women's underwear
23:00
Speaker 1: during athletic endeavors. There is a question what do you
23:03
Speaker 1: wear under those yoga pans? And you know, it's interesting
23:06
Speaker 1: because there's so much in terms of male athletic underwear
23:10
Speaker 1: and it's not awkward to talk about that market, and
23:13
Speaker 1: yet for some reason it is to talk about this one,
23:16
Speaker 1: even though this is a very real market and it
23:18
Speaker 1: doesn't seem to be very filled. Joining us now Stacy
23:20
Speaker 1: Hunter Harrington, owner of Quoactive, specializing in exactly this niche
23:26
Speaker 1: that has otherwise been largely unfilled, which is women's athletic
23:29
Speaker 1: underwear Stacy, how did you get involved to this? Well, uh,
23:34
Speaker 1: twenty five years plus in the industry, started mostly in
23:36
Speaker 1: the textile side. UM and being an athlete and going
23:40
Speaker 1: to enough yoga classes and spin classes and seeing women
23:44
Speaker 1: stripped down in a studio going wow, I can't believe
23:47
Speaker 1: that that's what they're wearing underneath their leggings. And it
23:51
Speaker 1: was either, I would say, without putting a direct stat
23:55
Speaker 1: on it, it was women were wearing underwear and the
23:58
Speaker 1: other forty were not wearing anything at all, And I
24:00
Speaker 1: was shocked. So for me understanding that there had to
24:05
Speaker 1: be there's a reason why we wear technical fabrics to
24:07
Speaker 1: work out with our leggings. Why did no one create
24:09
Speaker 1: a true technical underwear to wear underneath? So it's been
24:14
Speaker 1: a topic of conversation more around a white space of
24:17
Speaker 1: the market, but really more about hygiene than anything. So
24:20
Speaker 1: what does your product do? So, I mean, what's the
24:25
Speaker 1: secret sauce? Well, it's kind of it's got some patent
24:29
Speaker 1: product around it. It It was knit on a seamless machine
24:31
Speaker 1: into two pieces, so it's um got I guess most
24:36
Speaker 1: underwear has a thing called a gusset, which is the
24:39
Speaker 1: part that sits underneath the women's private parts, and of
24:44
Speaker 1: those products are cotton and cotton. I'm here to kind
24:47
Speaker 1: of break the myth on what cotton is. Cotton is
24:49
Speaker 1: great to wear every day, but not when you sweat.
24:52
Speaker 1: So I knit a total seamless gusset part which is
24:56
Speaker 1: made of nylon and spandex and it has anti microbium
24:59
Speaker 1: moisture WI properties in it, so it keeps you dry. Um.
25:03
Speaker 1: It was just something that was missing in the market.
25:05
Speaker 1: All right, this is where I'm going to get to
25:07
Speaker 1: a place where Paul is going to be awkward. But
25:10
Speaker 1: to me, I feel like this is key. Why not
25:11
Speaker 1: just wear nothing? I mean, why not go commander and
25:14
Speaker 1: just have your wicking pants and be done with it? Lisa,
25:18
Speaker 1: it's from I think it comes down to preference. Um.
25:20
Speaker 1: I think I look at it as a different having
25:23
Speaker 1: another layer too. When you get on a spin bike.
25:25
Speaker 1: Oh that's sorry. Um, sometimes you see too much when
25:30
Speaker 1: you're in a yoga class, you know. I think it
25:33
Speaker 1: just gives a little I think having that little extra
25:37
Speaker 1: layer is important and quo is meant to not shift
25:39
Speaker 1: and roll and you'll I can't wait till you try it.
25:43
Speaker 1: I mean, but This actually goes the whole Lulu Lemon thing.
25:46
Speaker 1: When there was a problem when you turned over and
25:48
Speaker 1: you saw too much. Yeah, this was the reason why
25:50
Speaker 1: you saw too much. Right, it is absolutely Let's talk
25:53
Speaker 1: about the business, shall we? Alright, how long has the
25:57
Speaker 1: company been in existence? And revenue and sales and numbers?
26:02
Speaker 1: Let's go to numbers. Numbers, okay, Um, we launched about
26:06
Speaker 1: a year ago. UM. Direct to consumer sales are doing
26:10
Speaker 1: really well. Um. Wholesale has been challenging, just as the
26:13
Speaker 1: business and retail, and you know, kind of I didn't
26:15
Speaker 1: take a traditional route in wholesale. I kind of wanted
26:18
Speaker 1: to go after the gym's um there. That way, it
26:22
Speaker 1: became a point of purchase. I mean to you know,
26:25
Speaker 1: Hanky Panky was a sixty million dollar panty program. It's
26:29
Speaker 1: at the beauty about what hanky Panky was? Is it
26:31
Speaker 1: sad at the register? I kind of in my mind
26:33
Speaker 1: when I created Quo, I wanted that to be this
26:35
Speaker 1: product where women would be, oh wow, I didn't know
26:38
Speaker 1: I needed that. Why is it that the market for
26:43
Speaker 1: men's wiking underwear I'm actually googling that right now, and
26:47
Speaker 1: there's so much The options are incredibly nothing nothing up,
26:51
Speaker 1: seam comes up. It's all of these lists of companies
26:54
Speaker 1: that sell this everywhere, from your local uh, you know,
26:58
Speaker 1: Haynes to everything else. Why is it that the market
27:01
Speaker 1: is so vacant in the in the women's space at least?
27:05
Speaker 1: I don't know, I mean the panty market. I mean
27:10
Speaker 1: Victoria's secret a loan is going to be a twelve
27:13
Speaker 1: billion dollar you know lingerie brand. I don't. I don't
27:17
Speaker 1: know why no one's specifically done it here. I think
27:21
Speaker 1: I think people have tried to do it, but it
27:22
Speaker 1: gets lost in an assortment of a line. Whereas men,
27:27
Speaker 1: for some reason, it just became the it was more
27:29
Speaker 1: the under arm or effect. It was a base layer product.
27:32
Speaker 1: How much is it twenty four dollars? And how have sales?
27:35
Speaker 1: And sales have been picking up? Yeah, I mean we're
27:37
Speaker 1: a grassroots you know, we're growing, um in stores or both.
27:43
Speaker 1: So what kind of stores? I mean, are you in
27:44
Speaker 1: a sports store or wearing them like Barry's boot camp,
27:48
Speaker 1: yoga studios? Bandiers are really large. Um uh, fitness retailer
27:55
Speaker 1: um Netta Porte picked us up. Yeah, it's growing. So
27:59
Speaker 1: mrs sort of anathema to what you should be doing.
28:01
Speaker 1: Which is marketing your brand, which is why you're here.
28:03
Speaker 1: I'm sure. But if somebody did not have your underpants,
28:06
Speaker 1: do you recommend commando or underpants? I would say, if
28:10
Speaker 1: you don't have quote or something close, I would say,
28:14
Speaker 1: go commando. It's better than wearing cotton to swedding. All right, Paul,
28:19
Speaker 1: that's your answer. There you go. I'm not sure that
28:22
Speaker 1: question and I woke up this morning, but now you go.
28:27
Speaker 1: And by the way, you can wear quote on the
28:29
Speaker 1: streets of New York too. When it's hot like that's
28:31
Speaker 1: been the last two days. It's it's okay. It's not good.
28:34
Speaker 1: It's not going to affect your health if it's just
28:36
Speaker 1: meant to break a sweating So there you go. Yeah,
28:41
Speaker 1: for your wife's day. Very good. Stacy Hunter Harrington, owner
28:45
Speaker 1: of Quo Active, joining us live in our Bloomberg Interactive
28:48
Speaker 1: Broker studio. Thank you so much for joining us. Wasn't
28:51
Speaker 1: that fun? I survived? Honestly, I don't understand why right
28:55
Speaker 1: that you used a good point. I mean, on the
28:57
Speaker 1: men's side, there's so much product on the women's side
28:59
Speaker 1: and it's not awkward or funny. And I think it
29:00
Speaker 1: has to do with people being a little bit less
29:03
Speaker 1: inclined to talk about female health in certain areas, uh
29:07
Speaker 1: than male health in certain areas. I'm sorry not to
29:09
Speaker 1: get on my soapbox, but I have to say this
29:12
Speaker 1: does highlight that point yep and quote was filling that
29:15
Speaker 1: niche so very well. Thanks for listening to the Bloomberg
29:18
Speaker 1: P and L podcast. You can subscribe and listen to
29:20
Speaker 1: interviews at Apple Podcasts or whatever podcast platform you prefer.
29:24
Speaker 1: Paul Sweeney, I'm on Twitter at pt Sweeney. I'm Lisa
29:27
Speaker 1: Abram woids I'm on Twitter at Lisa Abram Woyds one.
29:30
Speaker 1: Before the podcast, you can always catch us worldwide. I'm
29:32
Speaker 1: Bloomberg Radio