Latest / Bloomberg Intelligence / Amazon & Google Are Defining Consumerism's Future, Munster Says

Transcript

Amazon & Google Are Defining Consumerism's Future, Munster Says · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim
• 0:08
  Speaker 1: Fox along with my co host Lisa A. Bramowitz. Each
• 0:11
  Speaker 1: day we bring you the most important, noteworthy and useful
• 0:14
  Speaker 1: interviews for you and your money, whether you're at the
• 0:17
  Speaker 1: grocery store or the trading floor. Find the Bloomberg p
• 0:20
  Speaker 1: m L Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com.
• 0:32
  Speaker 1: All right now, right now, let's talk about Amazon and
• 0:35
  Speaker 1: Alphabet parent company of Google earnings with Gene Munster. He
• 0:38
  Speaker 1: is with the Loop of Ventures and Gene Munster tell us, well,
• 0:42
  Speaker 1: first of all, congratulations on Loop Ventures as always for
• 0:45
  Speaker 1: your prosperity and your your upward trajectory. Uh, you're gonna
• 0:50
  Speaker 1: match that along with what's going on with Amazon and Google,
• 0:53
  Speaker 1: because you know, you seem to have hitched your ride
• 0:55
  Speaker 1: to to behemos that just keep growing. Yeah things. So,
• 1:00
  Speaker 1: I mean, these are both megacab companies that are enjoying
• 1:04
  Speaker 1: a phenomenal core business and have some other beds that
• 1:08
  Speaker 1: should really reinvent these companies over the long hals, So
• 1:11
  Speaker 1: I just want to give you two quick points. First
• 1:14
  Speaker 1: is on Amazon, their unit growth is twenty four percent.
• 1:17
  Speaker 1: That's the pace of the sold units. That was the
• 1:20
  Speaker 1: same unit growth as in the December quarter, which is
• 1:22
  Speaker 1: hard because the numbers get bigger, it's harder to continue.
• 1:25
  Speaker 1: That's that's the impression number. And from Google's perspective, dead
• 1:28
  Speaker 1: paid click growth, that's the key metric in the street
• 1:32
  Speaker 1: was looking forward was up from last quarter. So what
• 1:36
  Speaker 1: I really want to emphasize here is these are behemoth companies.
• 1:40
  Speaker 1: Their core businesses are doing phenomenal, but the other crazy
• 1:44
  Speaker 1: part is that they're investing in these other optionality values
• 1:47
  Speaker 1: that will reinvent these businesses in the next decades. You know,
• 1:51
  Speaker 1: as you talk about these behemoth companies that are taking
• 1:54
  Speaker 1: over everything, I have to bring up the main theme
• 1:57
  Speaker 1: that is on a lot of people's minds. At what
• 1:59
  Speaker 1: point are these companies too big and are actually restricting
• 2:03
  Speaker 1: growth in other parts of the economy and are frankly
• 2:06
  Speaker 1: stifling out any competition that could possibly come up. Well,
• 2:12
  Speaker 1: both of these companies have a disruptive factor on competition.
• 2:16
  Speaker 1: So in to both cases, they had a huge impact
• 2:19
  Speaker 1: in the media world. Obviously Amazon what they've done to
• 2:21
  Speaker 1: brick and mortar, and so yes, they are causing an
• 2:24
  Speaker 1: incredible wake of heartache for other companies. But the reality
• 2:29
  Speaker 1: is that this is how consumers want the future to evolve,
• 2:32
  Speaker 1: and they are defining that. And so I think that
• 2:35
  Speaker 1: that's just the they're not too big too. They still
• 2:38
  Speaker 1: have room to get bigger, and unfortunately for other companies,
• 2:41
  Speaker 1: they're going to get some companies, a lot of companies
• 2:43
  Speaker 1: will get run over teen months to just a but
• 2:46
  Speaker 1: you know your numbers into perspective, all right, So unit
• 2:49
  Speaker 1: growth at Amazon, at a company that is doing it,
• 2:53
  Speaker 1: has a run rate right now of a hundred and
• 2:55
  Speaker 1: forty two billion dollars. It's really hard to put your
• 3:01
  Speaker 1: mind around. And we love doing this kind of stuff.
• 3:03
  Speaker 1: But one other thought here is that if you think
• 3:05
  Speaker 1: about total e commerce in the US, about twenty of
• 3:08
  Speaker 1: it today is is Amazon, as you mentioned, growing overall
• 3:13
  Speaker 1: e commerce from the US and growing at eight percent.
• 3:15
  Speaker 1: So these are just staggering numbers. And and I want
• 3:18
  Speaker 1: to make sure we also talk a little bit about
• 3:20
  Speaker 1: what some of the things that both these companies are
• 3:22
  Speaker 1: working on, because that I think it is equally as exciting. Well,
• 3:25
  Speaker 1: go for you, go for it, Jim, because as you say,
• 3:27
  Speaker 1: this is almost like creative destruction, and it is really uh,
• 3:31
  Speaker 1: well it's creating the future now. It is so in
• 3:35
  Speaker 1: Amazon's case, the three areas that they're really focused on
• 3:38
  Speaker 1: our media fulfillment and then uh international, but media this
• 3:42
  Speaker 1: basically they want to become more like a Showtime or
• 3:46
  Speaker 1: an HBO and just continue to add content their fulfillment.
• 3:49
  Speaker 1: They're doing last mile. And then for Google's side, I
• 3:52
  Speaker 1: just want to leave your listeners with a new word
• 3:56
  Speaker 1: called TensorFlow. Tenser flow and remember that because this is
• 4:01
  Speaker 1: the new platform that Google has that allows anybody to
• 4:05
  Speaker 1: access it for doing machine learning and artificial intelligence. And
• 4:09
  Speaker 1: they basically Google is allowing everyday people and companies to
• 4:14
  Speaker 1: access all their learnings and machine learning. Their CEO mentioned
• 4:17
  Speaker 1: Google CEO mentioned it. So the first thing you mentioned
• 4:19
  Speaker 1: on the call last night was TensorFlow, and I just
• 4:22
  Speaker 1: want to point that out. This is an example of
• 4:24
  Speaker 1: how Google is going to redefine themselves with the next decade.
• 4:27
  Speaker 1: What about the Google Car. I know that that was
• 4:29
  Speaker 1: something that was a pretty hot topic a while back,
• 4:32
  Speaker 1: but now there's sort of this feeling that in Detroit,
• 4:35
  Speaker 1: the big beheemoth automakers are really gonna have the upper
• 4:38
  Speaker 1: hand when it comes to autonomous driving and electric vehicles.
• 4:42
  Speaker 1: I think Detroit is going to be in a world
• 4:45
  Speaker 1: of hurt in the next one years. I'm sad to
• 4:48
  Speaker 1: predict that, but I think that that they just have
• 4:50
  Speaker 1: a lot of uh infrastructure around manufacturing and labor that
• 4:55
  Speaker 1: is difficult for them to break from. But Google is
• 4:58
  Speaker 1: going to take over. I think Google test lads and
• 5:01
  Speaker 1: a great position. Google mentioned on their call last night
• 5:05
  Speaker 1: that they see their way Motivision, which is the car division,
• 5:07
  Speaker 1: to also be in public transportation. I mean, this is
• 5:10
  Speaker 1: the type of broad thinking that we're hearing from Google
• 5:13
  Speaker 1: when you just don't hear that type of broad thinking
• 5:15
  Speaker 1: from Detroit. You know, I just want to take you
• 5:18
  Speaker 1: back to this tensor flow t E N s o
• 5:21
  Speaker 1: r flow because this is really an amazing site that well,
• 5:26
  Speaker 1: you know, you get to use words like neural networks
• 5:28
  Speaker 1: for machine translation. I'm not sure exactly what that is.
• 5:31
  Speaker 1: I can make a guess, but what are the kinds
• 5:33
  Speaker 1: of companies that will be using this so that what
• 5:36
  Speaker 1: that is is basically Google allows you to use their
• 5:39
  Speaker 1: voice recognition so we can just tap into them. They
• 5:42
  Speaker 1: can listen to what we're doing, it can do a
• 5:45
  Speaker 1: transcript of it and start to build insights from those transcripts.
• 5:48
  Speaker 1: So that's some of the things that you're talking about there.
• 5:50
  Speaker 1: But other things that this uh tensor flow does is
• 5:54
  Speaker 1: allows you to use Google's learnings by looking at an image,
• 5:57
  Speaker 1: so uh looking at image and reading what that image
• 6:00
  Speaker 1: my uh information about that image, and so it is uh,
• 6:04
  Speaker 1: it's just the start of what is going to be
• 6:06
  Speaker 1: a machine learned driven world. Yeah, Gene Munster, thank you
• 6:09
  Speaker 1: so much for joining us. We could talk a lot
• 6:10
  Speaker 1: about this. Unfortunately we have to leave it there. Jane
• 6:13
  Speaker 1: Munster is the co founder of loop Venture's former managing
• 6:16
  Speaker 1: director and senior research analyst at Piper Jaffrey Companies. I'm
• 6:21
  Speaker 1: Lisa Abramoid's here with pim Fox. You've been listening to
• 6:23
  Speaker 1: Bloomberg Markets on Bloomberg eleven three. Oh. We did get
• 6:40
  Speaker 1: our GDP report this morning. In the U S economy
• 6:42
  Speaker 1: expanded at the slowest pace in three years. This is
• 6:45
  Speaker 1: perhaps due to the weaker auto sales and lower home
• 6:49
  Speaker 1: heating bills. But does this signify some kind of broader
• 6:53
  Speaker 1: weakening that is starting to set in? We want to
• 6:56
  Speaker 1: find out. Constance Hunter has some answers for us. Constance
• 6:59
  Speaker 1: Hunter is chief economist a KPMG and constants. What was
• 7:03
  Speaker 1: your main takeaway from this particular report. Well, two things. One,
• 7:07
  Speaker 1: I know everybody's focused on the consumption data because of
• 7:10
  Speaker 1: course the consumer seventy GDP and it's very important. And
• 7:15
  Speaker 1: the lower energy prices and and mild winter really contributed.
• 7:19
  Speaker 1: That subtracted thirty basis points off GDP. Then the lower
• 7:23
  Speaker 1: rate of consumption of auto subtracted another forty five basis points,
• 7:27
  Speaker 1: so we're looking at factors that really slowed consumption in
• 7:31
  Speaker 1: a concerning way. Even if you added back those factors,
• 7:33
  Speaker 1: we only have a one percent annualized consumption rate in
• 7:36
  Speaker 1: the first quarter. And the question is why. Because we've
• 7:39
  Speaker 1: had seventy seven consecutive months of jobs growth, we're starting
• 7:42
  Speaker 1: to see wages go up, and not just the wage
• 7:46
  Speaker 1: data that we got today, but for example, the Atlanta
• 7:49
  Speaker 1: Fed has an index the employment caused their employment cost index,
• 7:53
  Speaker 1: which doesn't factor in UH benefits like healthcare. It's it's
• 7:57
  Speaker 1: the money that goes right to the individual and only
• 8:00
  Speaker 1: for families earning under a D fifty dollars. So it's
• 8:04
  Speaker 1: a really important piece of data, and that's showing at
• 8:08
  Speaker 1: up three point five percent year of a year. So
• 8:11
  Speaker 1: this really is a puzzle. And and so given that,
• 8:14
  Speaker 1: I think we're looking at somewhat of a temporary blip
• 8:17
  Speaker 1: in the consumption numbers. But the other thing that's not
• 8:19
  Speaker 1: getting as much air time is that we subtracted almost
• 8:21
  Speaker 1: one percent off of the GDP growth rate because of
• 8:24
  Speaker 1: inventory declines. And those inventory declines go hand in hand
• 8:29
  Speaker 1: with um imports. So we saw imports increase. We also
• 8:33
  Speaker 1: saw exports increase, which is a really good sign. Even
• 8:36
  Speaker 1: though net imports subtracted from GDP, that increase in exports
• 8:39
  Speaker 1: supports the idea that the rest of the world is
• 8:42
  Speaker 1: growing in a more robust and stronger fashion. So it's
• 8:45
  Speaker 1: going to help lift GDP overall. And so I think
• 8:48
  Speaker 1: we have a hold on one second, I'm actually struggling
• 8:51
  Speaker 1: to understand that. In other words, if inventories drop, that's
• 8:55
  Speaker 1: because our imports are no, no, no, Sorry I didn't
• 8:59
  Speaker 1: explain that. Well. So if if we see the strap
• 9:01
  Speaker 1: in inventories this quarter corresponding with an increase in imports,
• 9:05
  Speaker 1: what it suggests that the next quarter we're going to
• 9:07
  Speaker 1: see those inventories filled back up. Sorry, thank you for
• 9:11
  Speaker 1: clarifying that. That wasn't terribly clear. Let me see if
• 9:16
  Speaker 1: I can just understand where we are in the cycle though,
• 9:18
  Speaker 1: because I I keep hearing this idea that you know,
• 9:21
  Speaker 1: we're eight years so whatever it is, seven years into
• 9:23
  Speaker 1: a bull market, and they're this business cycle, and then
• 9:27
  Speaker 1: you get people will tell you that it's different this time,
• 9:29
  Speaker 1: because if you measure it from over here, you know
• 9:31
  Speaker 1: it's not the same. What's your take on where we
• 9:34
  Speaker 1: are in the in the business and interest rate cycle? Yeah,
• 9:37
  Speaker 1: I think we're at late stage. We're what I would
• 9:39
  Speaker 1: call the aph inning, and the FEDS job is to
• 9:42
  Speaker 1: create extra innings, all right, Um, but we are getting
• 9:46
  Speaker 1: to a point where we're having um wage increases. We're
• 9:50
  Speaker 1: gonna start to see labor shortages when I don't know,
• 9:53
  Speaker 1: sometime in sometime in and that in and of itself
• 9:57
  Speaker 1: is going to hamper how much growth we can have
• 9:59
  Speaker 1: going for wards. So I think we're going to be
• 10:01
  Speaker 1: looking at the all things being equal, which of course
• 10:04
  Speaker 1: they never are, but all things being equal, we're looking
• 10:07
  Speaker 1: at a mild recession sometime in late nineteen because of
• 10:11
  Speaker 1: labor shortages, because we have increased wages, and that's going
• 10:15
  Speaker 1: to put a crimp on our ability to continue grows.
• 10:17
  Speaker 1: So just in time, for the mid term elections, just
• 10:20
  Speaker 1: in time for the mid term. I just wanted to
• 10:22
  Speaker 1: make we got that twenty eighteen mid term elections. I
• 10:28
  Speaker 1: don't know that will happen in I would say late either,
• 10:31
  Speaker 1: like just sort of starting at the end of twenty
• 10:33
  Speaker 1: eighteen into twenty nineteen. I think we've got some runway. Well,
• 10:36
  Speaker 1: we'll put you down for November two thousand eighteen. I
• 10:39
  Speaker 1: want to just point out, Yeah, for now, I wanted
• 10:41
  Speaker 1: to point out. Black Rock's chief executive officer, Larry Fink
• 10:44
  Speaker 1: was on Bloomberg Television earlier this morning, and he said
• 10:46
  Speaker 1: that it was improbable that the US is GDP will
• 10:49
  Speaker 1: grow to three percent given the current demographics, and said
• 10:52
  Speaker 1: that right now the US is truly slowing down. Um,
• 10:57
  Speaker 1: you know, Constants, you seem like it seems like you
• 10:59
  Speaker 1: agree with the way, and not just demographics, but also productivity.
• 11:02
  Speaker 1: So potential GDP is the sum of the change in
• 11:06
  Speaker 1: the growth rate of productivity plus the change in the
• 11:08
  Speaker 1: working age population. Working age populations growing at zero point
• 11:14
  Speaker 1: that is is immigrants by the way, and productivity zero
• 11:18
  Speaker 1: point eight. That gets us to a one point one
• 11:20
  Speaker 1: potential GDP. Three is a pipe dream. Constant We were
• 11:23
  Speaker 1: talking earlier about the results from Synchrony and Capital One
• 11:26
  Speaker 1: showing an increasing number of charge offs for credit card loans.
• 11:30
  Speaker 1: How concerned should we be about this? Look at it.
• 11:34
  Speaker 1: It seems like it's it's a moderately worrying sign, and
• 11:38
  Speaker 1: it's it's something where I would say, this is now
• 11:40
  Speaker 1: an indicator you need to watch, whereas to three years
• 11:43
  Speaker 1: ago it wasn't an indicator you need to pay attention to.
• 11:45
  Speaker 1: If you have a dashboard you're looking at, you need
• 11:47
  Speaker 1: to make sure this is on that dashboard, All right,
• 11:50
  Speaker 1: that dash But we gotta do you think that dashboard
• 11:53
  Speaker 1: is on everybody's desk? Do you think everybody gets we
• 11:56
  Speaker 1: have a doomsday countdown? Pretty much everyone here? I mean,
• 12:00
  Speaker 1: the only reason I asked is because it certainly doesn't
• 12:02
  Speaker 1: look that way when you see you know, when you
• 12:04
  Speaker 1: see bonds sell off and you see people go into
• 12:06
  Speaker 1: risky acids like stocks in high yield. Yeah, well, look
• 12:09
  Speaker 1: where are we on bonds to twenty right? So I
• 12:12
  Speaker 1: don't know that looks like a bond rally from where
• 12:14
  Speaker 1: I sit based on the last six months, right, we
• 12:16
  Speaker 1: had that that we had that backup in the tenure
• 12:18
  Speaker 1: year old and now we're back down to twenty and
• 12:20
  Speaker 1: my hashtag rates low for a long time has remarkable
• 12:23
  Speaker 1: shelf life that has surprised even me. And you're calling
• 12:27
  Speaker 1: stuff for two more interest rate hikes one I think
• 12:30
  Speaker 1: one more this year. So they had forecast three for
• 12:32
  Speaker 1: this year and and I think they'll be lucky to
• 12:35
  Speaker 1: get away with two rate hikes this year. All right,
• 12:37
  Speaker 1: thanks very much appreciated. Constance Hunter joining us KPMG Chief Economist,
• 12:42
  Speaker 1: much appreciated. We want to take a moment to let
• 12:53
  Speaker 1: you know about something new from Bloomberg. Starting right now,
• 12:56
  Speaker 1: you can use our io s app or our new
• 12:59
  Speaker 1: Google Chrome extension to scan any news story on any website,
• 13:03
  Speaker 1: instantly revealing relevant news and market data from Bloomberg and
• 13:06
  Speaker 1: other sources related to the companies and people you're reading about.
• 13:09
  Speaker 1: So no matter where you're reading the news, you can
• 13:11
  Speaker 1: bring the power of Bloomberg's news and data with you.
• 13:14
  Speaker 1: It's pretty amazing. Download our io s app or search
• 13:17
  Speaker 1: for the Bloomberg extension on the Chrome Store to try
• 13:19
  Speaker 1: it out. Learn more at Bloomberg dot com. Slash lens
• 13:30
  Speaker 1: Well the zero point seven percent increase in first quarter GDP,
• 13:34
  Speaker 1: notwithstanding our next guest says that trends and consumer confidence
• 13:38
  Speaker 1: are healthy, and that consumers are expressing optimism regarding the
• 13:42
  Speaker 1: short term outlook for business, jobs, and personal finance. This
• 13:46
  Speaker 1: all leads us to housing and Cheryl Palmer, the chief
• 13:49
  Speaker 1: executive of Taylor Morrison. Cheryl Palmer, thank you very much
• 13:52
  Speaker 1: for being with us, my pleasure. Thank you very much
• 13:55
  Speaker 1: for having me. Now. I was able to go through
• 13:58
  Speaker 1: your conference call, and boy, there are a lot of
• 14:01
  Speaker 1: different metrics that you use to judge the health of
• 14:03
  Speaker 1: your business, and I don't know whether you want to
• 14:05
  Speaker 1: start with net sales orders, just explained for people how
• 14:09
  Speaker 1: do you determine success, and then maybe talk a little
• 14:12
  Speaker 1: bit about the regional strength, which you say is pretty comprehensive. Yeah, no,
• 14:18
  Speaker 1: thank you. You know, we did report yesterday and we're
• 14:20
  Speaker 1: quite delighted with the results we were able to share.
• 14:24
  Speaker 1: And there are a number of metrics to your point,
• 14:27
  Speaker 1: but they all do derive from your opening comments, and
• 14:30
  Speaker 1: that's how people are feeling about the world today. And
• 14:34
  Speaker 1: I think there's been very encouraging signs as we you know,
• 14:37
  Speaker 1: came through fourth quarter and certainly came into the spring
• 14:40
  Speaker 1: selling season of the first quarter. The consumers feeling good,
• 14:44
  Speaker 1: They're feeling confident, healthy, there's out there spending money, they
• 14:48
  Speaker 1: feel good about their jobs. They're starting to see UM
• 14:52
  Speaker 1: improvement in income, you know, affordability. So it is still
• 14:56
  Speaker 1: very very good low interest rates. And that's know, that's
• 15:00
  Speaker 1: creating UM an optimism in our business and it really
• 15:05
  Speaker 1: manifested itself through UM a thirty three increase of sales
• 15:11
  Speaker 1: here over a year, you know, Cheryl Um. First of all,
• 15:14
  Speaker 1: I wanted to ask if you are concerned about the
• 15:18
  Speaker 1: pricing in certain markets, particularly Toronto, San Francisco, New York.
• 15:24
  Speaker 1: People are saying that the acceleration is certainly slowing down.
• 15:27
  Speaker 1: If not, uh, you know, showing signs of petering out,
• 15:31
  Speaker 1: particularly on the highest end. Are you seeing something similar
• 15:35
  Speaker 1: to sort of edify the concern of sort of slowed
• 15:38
  Speaker 1: down in those markets? You know, we actually have had
• 15:42
  Speaker 1: great success across all of our price point. Now, some
• 15:45
  Speaker 1: of the markets you mentioned we build, and we used
• 15:47
  Speaker 1: to build in Toronto, we don't anymore, UM, but we
• 15:50
  Speaker 1: do build in San Francisco. We do build in markets
• 15:53
  Speaker 1: across the US and to a number of consumer groups,
• 15:56
  Speaker 1: and we are seeing strength UM at the first time
• 16:00
  Speaker 1: buyers We're seeing it in that move up second time buyer.
• 16:03
  Speaker 1: We're seeing it with our fifty plus and those are
• 16:06
  Speaker 1: some of our highest average sales prices. And um, some markets,
• 16:11
  Speaker 1: you know, they are getting back to what I would
• 16:13
  Speaker 1: call some of the historic highs and some markets still
• 16:16
  Speaker 1: have a lot of runway. But as we reported yesterday,
• 16:19
  Speaker 1: you know we've raised prices and probably about our community
• 16:22
  Speaker 1: is just in the first quarter. So could you speak
• 16:25
  Speaker 1: a little bit about the Esplanade Golf and a country
• 16:28
  Speaker 1: club community. That one is in sarah Sota, but you've
• 16:30
  Speaker 1: got a variety of them, and I want you to
• 16:32
  Speaker 1: use that as an example of the kinds of products
• 16:34
  Speaker 1: that you are putting into the marketplace and maybe tell
• 16:37
  Speaker 1: us a little bit about the customer reception and cost. Yeah,
• 16:41
  Speaker 1: that one's really exciting. Our Esplanade brand is in Florida,
• 16:45
  Speaker 1: and we have ten of these lifestyle communities throughout Florida.
• 16:49
  Speaker 1: And the one that I highlighted in our call yesterday,
• 16:51
  Speaker 1: you're right, was in um Sara Soda, and I spoke
• 16:55
  Speaker 1: to the new amenities that we've opened and really the lifestyle,
• 16:59
  Speaker 1: the Ritz Carlton approach and our programming that we've created
• 17:02
  Speaker 1: with really dedicated concierge's staff, and we have seen throughout
• 17:08
  Speaker 1: Florida and throughout the Esplanade brand building since the middle
• 17:12
  Speaker 1: of last year through the shoulder selling season um at
• 17:16
  Speaker 1: a number of price points. Is even in our Esplanade
• 17:19
  Speaker 1: communities we build from, you know, the low two hundreds,
• 17:21
  Speaker 1: well over a million dollars. And these are very discerning
• 17:25
  Speaker 1: folks know what they want now, when they wanted, how
• 17:27
  Speaker 1: they want it, and they're going to get exactly that.
• 17:30
  Speaker 1: And we've had just a phenomenal spring selling season, and
• 17:34
  Speaker 1: I credit the team's great execution in delivering new amenities
• 17:39
  Speaker 1: with great pulside service, antiki bar and new restaurants. That's
• 17:44
  Speaker 1: how I gotta say. So that sounds it sounds lovely
• 17:47
  Speaker 1: and clearly well. But I want to also while we've
• 17:52
  Speaker 1: got to want you to talk a little bit about
• 17:54
  Speaker 1: where you are making new deals, where you are acquiring property,
• 17:58
  Speaker 1: because I know Atlanta has been a focus as well
• 18:00
  Speaker 1: as Dallas, and you've got that Darling brand, You're correct,
• 18:04
  Speaker 1: and so our Darling businesses in Dallas and Houston, and
• 18:07
  Speaker 1: we are certainly investing in It's it's new for us.
• 18:10
  Speaker 1: I mean, we just introduced our Taylor Morrison Brandon Dallas.
• 18:13
  Speaker 1: So now we have both our Darling and Taylor Morrison
• 18:16
  Speaker 1: in Houston, we also have both brands, So Dallas with
• 18:19
  Speaker 1: the new Taylor Morrison brand, were investing California, were investing
• 18:24
  Speaker 1: UM some of our newer markets in the Caroline. It's
• 18:26
  Speaker 1: really across the portfolio. Phoenix is one of our larger
• 18:29
  Speaker 1: are larger businesses, so that machine continues to need to
• 18:32
  Speaker 1: be invested in UM. So we're looking for opportunities across
• 18:36
  Speaker 1: the US today. Cheryl, this might seem like a kind
• 18:39
  Speaker 1: of stage left question, but in my opinion, we read
• 18:43
  Speaker 1: a lot about, you know, potential flooding on the coasts
• 18:46
  Speaker 1: and concerns that potential buyers might have about this when
• 18:50
  Speaker 1: people are buying your properties. Are you finding that a
• 18:53
  Speaker 1: lot more people are talking about that where it's located,
• 18:57
  Speaker 1: what the potential risk would be in a flooding type
• 19:00
  Speaker 1: the situation. You know, we don't see that often. Certainly
• 19:04
  Speaker 1: we have exorbitant range and some markets across the country,
• 19:08
  Speaker 1: but I wouldn't tell you that that's top on the
• 19:09
  Speaker 1: folks mind. Not with rains, not with raids. I'm talking
• 19:12
  Speaker 1: about coastal properties. As you know, sees rise because we've
• 19:15
  Speaker 1: been reading a lot about you know that this could
• 19:17
  Speaker 1: potentially even impede valuations in places like Miami or other
• 19:21
  Speaker 1: coastal cities. Yeah, I'm really going to come down to
• 19:24
  Speaker 1: once again, we don't We're not in Miami, but we
• 19:26
  Speaker 1: certainly are in many coastal cities in California, and it
• 19:28
  Speaker 1: really comes down to the design and the development of
• 19:31
  Speaker 1: those communities UM and how that infrastructure has been created.
• 19:36
  Speaker 1: And be honest, it's not something that I would tell
• 19:40
  Speaker 1: you is on top of consumers minds. Land acquisition, Where
• 19:43
  Speaker 1: are you doing the most acquisition? I know you try
• 19:45
  Speaker 1: to do it organically, but maybe give us some markets.
• 19:49
  Speaker 1: So some of the markets I just mentioned Texas, UM's
• 19:53
  Speaker 1: very healthy, California, Arizona, are smaller businesses in Colorado and
• 19:58
  Speaker 1: the Caroline As. We are investing, and we're investing over
• 20:02
  Speaker 1: the last couple of years, we've done some UM acquisitions
• 20:05
  Speaker 1: of new companies. Right now, we're very focused on organic
• 20:08
  Speaker 1: acquisition to your point, and I would tell you it's
• 20:11
  Speaker 1: really across our entire portfolio, and we tend to have
• 20:14
  Speaker 1: our longer landbanks where we build large master planned communities
• 20:17
  Speaker 1: like our esplanades in Florida, but we're still looking for
• 20:20
  Speaker 1: opportunities there and then in Arizona as well. Are you
• 20:24
  Speaker 1: concerned because this you're describing something that sounds like a
• 20:27
  Speaker 1: perfect alignment of the stars, and I'm wondering when that happens.
• 20:31
  Speaker 1: Do you there's a little voice go off in your
• 20:34
  Speaker 1: head that says, well, this isn't gonna last forever. Um,
• 20:38
  Speaker 1: that voice is always in my head and that's why, um,
• 20:42
  Speaker 1: you know, it might sound good and it is, and
• 20:44
  Speaker 1: generally I am very bullish on how the market hang on.
• 20:46
  Speaker 1: We're going to just have to break in Cheryl Palmer,
• 20:49
  Speaker 1: Chief executive Taylor Morrison, thank you very much. Well, we
• 21:03
  Speaker 1: want to learn more about utility stocks because utilities used
• 21:07
  Speaker 1: to be the stocks you went to if you were
• 21:09
  Speaker 1: looking for yield, but perhaps times have changed. We have
• 21:12
  Speaker 1: John Bartlett. He is the vice president of Reeves Asset Management.
• 21:16
  Speaker 1: He joins us here in our Bloomberg eleven three oh studios. John,
• 21:19
  Speaker 1: thanks very much for coming in. Our utilities looked upon
• 21:24
  Speaker 1: as investments for yield or has that just been thrown
• 21:29
  Speaker 1: out the window? Him? Principally not yield is a very
• 21:34
  Speaker 1: still important part of the total return of um of utilities.
• 21:38
  Speaker 1: But but they do have an opportunity for you know,
• 21:41
  Speaker 1: pretty pretty modest earnings growth. We see the industry growing
• 21:44
  Speaker 1: it's earnings about five percent per year, and that's really
• 21:47
  Speaker 1: on the back of continued investment, largely at the state level,
• 21:50
  Speaker 1: but also at the federal level too. So UM, I
• 21:54
  Speaker 1: want to I want to talk a little bit of
• 21:55
  Speaker 1: it infrastructure spending because definitely your world overlaps we had
• 22:00
  Speaker 1: heard during the campaigning season about a one trillion dollar
• 22:04
  Speaker 1: infrastructure spending plan. We haven't heard much more about it,
• 22:08
  Speaker 1: but you know, is there still some opportunity from fiscal
• 22:12
  Speaker 1: stimulus that you are expecting to actually happen in the
• 22:14
  Speaker 1: near term. Well, you know, the good news on that
• 22:17
  Speaker 1: front is, UM, it doesn't really matter that much to
• 22:20
  Speaker 1: me as utility investor. UM. One of the things we're
• 22:23
  Speaker 1: really looking forward to right now is getting UM five
• 22:26
  Speaker 1: commissioners back at the Federal Energy Regulatory Commission that's going
• 22:30
  Speaker 1: to That's probably the easiest way that the federal government
• 22:33
  Speaker 1: can get money started spending on infrastructures, just to get
• 22:36
  Speaker 1: those uh uh, those commissioners back in their seats, because
• 22:39
  Speaker 1: once that happens, there's a real spending opportunity. And for instance,
• 22:43
  Speaker 1: there's a number of pipelines that are just simply held
• 22:45
  Speaker 1: up by the fact that they don't have commissioners in
• 22:47
  Speaker 1: their chairs. The federal government doesn't need to spend the
• 22:49
  Speaker 1: time to get that stuff going. Well, you know, John,
• 22:52
  Speaker 1: we Uh, Lisa and i UH and the Bloomberg team,
• 22:55
  Speaker 1: we were at the Bloomberg New Energy of Finance, a
• 22:58
  Speaker 1: summit looking into the future of energy, and the constant
• 23:03
  Speaker 1: theme was renewables and the actual cost of generating electricity.
• 23:10
  Speaker 1: And I'm one, I'm warning you know, your your firm
• 23:12
  Speaker 1: has been what fifty five years in business, you specialized
• 23:16
  Speaker 1: in this. You manage nearly three billion. You've got an
• 23:18
  Speaker 1: E t F that focuses on on utilities, which maybe
• 23:22
  Speaker 1: you can paint us a picture of the utility that
• 23:24
  Speaker 1: is the most forward thinking when it comes to embracing
• 23:28
  Speaker 1: this renewable and low cost structure. Well, we're very excited
• 23:32
  Speaker 1: him uh. And if you look at the portfolio UH
• 23:35
  Speaker 1: that that's in the E t F, the ticker symbol
• 23:38
  Speaker 1: for that is U T E S, you'll see that
• 23:41
  Speaker 1: we're we're for us. Renewables are a very important focus
• 23:45
  Speaker 1: for us. We see that wind um resources will become
• 23:50
  Speaker 1: very competitive with UH, with other forms of electric generation,
• 23:55
  Speaker 1: even without the tax credits that they enjoy Today. Generally speaking,
• 23:59
  Speaker 1: the price of power is going down. There's not a
• 24:01
  Speaker 1: lot of demand incremental demand for new power. We continue
• 24:04
  Speaker 1: to find new ways to make generating power cheaper, and
• 24:07
  Speaker 1: the price of natural gas remains under control. So everything
• 24:10
  Speaker 1: from from that perspective really creates a great backdrop for
• 24:14
  Speaker 1: investment in utilities or for utilities because you know they
• 24:18
  Speaker 1: can go put put dollars to work and help help
• 24:22
  Speaker 1: their customers without having to go hat in hand back
• 24:24
  Speaker 1: to the regulator asking for for big rate rate increases
• 24:28
  Speaker 1: above inflation. So in your almost three billion dollar portfolio
• 24:32
  Speaker 1: of assets, what proportion would you say is tied to
• 24:36
  Speaker 1: renewable energy utilities versus others? And how much has that grown? Sure? Um, Well,
• 24:42
  Speaker 1: if you look at at everything that we manage, our
• 24:45
  Speaker 1: our largest single customers are closed and mutual fund and
• 24:48
  Speaker 1: the ticker symbol for that is is u t G.
• 24:50
  Speaker 1: That's about eight percent utilities. In fact, it's called the
• 24:53
  Speaker 1: Reeves Utility Income Fund. UM. I would say across the
• 24:57
  Speaker 1: rest of the spectrum about um would be would be
• 25:02
  Speaker 1: utilities And how much is that up from say, five
• 25:04
  Speaker 1: years ago? Um, you know, it's it's probably about about
• 25:08
  Speaker 1: the same. Um. We will always have obviously a great
• 25:12
  Speaker 1: deal of utilities and what we do. It's something that
• 25:15
  Speaker 1: we're experts on and spent a lot of time time studying.
• 25:18
  Speaker 1: But what I like about this particular portfolio, just in
• 25:22
  Speaker 1: terms of its diversity, is it not just it does
• 25:25
  Speaker 1: not just include what we consider energy utilities. It concludes
• 25:29
  Speaker 1: companies such as Charter Communications, Comcast, Verizon. We forget that,
• 25:33
  Speaker 1: you know, Verizon and A T and T. We forget
• 25:35
  Speaker 1: sometimes that the telephone and the mobile phone operators nowadays
• 25:39
  Speaker 1: are considered utilities and therefore those dividends are available for harvest. Well,
• 25:45
  Speaker 1: they're not regulated in the same way that utilities are.
• 25:47
  Speaker 1: But but you're absolutely right. We we we consider them
• 25:49
  Speaker 1: core infrastructure holdings and uh and we're very excited about
• 25:52
  Speaker 1: about cable generally because I noticed also, and we were
• 25:55
  Speaker 1: talking with Vince Piazza are US oil and Gas analyst,
• 26:00
  Speaker 1: and one of the companies in here is Royal Dutch Shell.
• 26:03
  Speaker 1: Now he doesn't cover but you know, I was looking
• 26:04
  Speaker 1: at the dividend of Royal Dutch Sell and we're talking
• 26:07
  Speaker 1: like over seven percent. That's right, and Pim, we're not
• 26:10
  Speaker 1: really counting on a on a huge rebound in the
• 26:13
  Speaker 1: price of oil right now. We're we're sort of it.
• 26:15
  Speaker 1: We try to be as agnostic as we can to
• 26:17
  Speaker 1: the price of oil, but within Royal Dutch there is
• 26:19
  Speaker 1: a wonderful cost cutting opportunity that's been at work and
• 26:22
  Speaker 1: we think is going to continue to play out. Thank
• 26:24
  Speaker 1: you so much for joining us. Truly a pleasure to
• 26:26
  Speaker 1: speak with you. John Bartlett is vice president of Reeves
• 26:29
  Speaker 1: Asset Management that he is focusing on utilities with a
• 26:33
  Speaker 1: portfolio of almost three billion dollars UH and certainly a
• 26:36
  Speaker 1: lot of changes coming up with both the potential infrastructure
• 26:39
  Speaker 1: spending as well as the move toward renewable is one
• 26:41
  Speaker 1: thing that we heard a lot about earlier this week,
• 26:43
  Speaker 1: really was trying to make money off of renewables at
• 26:48
  Speaker 1: a time when there is so much policy uncertainty. Thanks
• 26:53
  Speaker 1: for listening to the Bloomberg P and L podcast. You
• 26:56
  Speaker 1: can subscribe and listen to interviews at Apple Podcasts, SoundCloud,
• 27:00
  Speaker 1: or whatever podcast platform you prefer. I'm Pim Fox. I'm
• 27:03
  Speaker 1: on Twitter at pim Fox. I'm on Twitter at Lisa
• 27:07
  Speaker 1: Abramo wits one before the podcast. You can always catch
• 27:10
  Speaker 1: us worldwide on Bloomberg Radio