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Boeing Report, US Retail Sales · Bloomberg Intelligence

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Speaker 2: Joining us speaking of is George Ferguson. He's senior Aerospace,
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Speaker 2: Defense and Airlines analyst at Bloomberg Intelligence, and he joins
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Speaker 2: us from Princeton, New York, OURVII headquarters over there in
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Speaker 2: New Jersey.
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Speaker 3: What did I say, Princeton, New York?
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Speaker 4: I did?
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Speaker 3: Yeah, sorry, coffee, coffee.
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Speaker 5: I haven't had that second cup because it was delayed.
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Speaker 5: I'll get you.
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Speaker 2: Well, the eleven o'clock hour will be a good hour
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Speaker 2: for me. So Boeing is having a lot of issues.
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Speaker 2: The CEO will be facing leaders in Congress today. There
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Speaker 2: was also Later's whistleblower report that alleged to the planemaker
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Speaker 2: mishandled and lost track of hundreds of faulty parts, some
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Speaker 2: of which had been in may have been installed in
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Speaker 2: some new seven thirty seven Max planes. George, Well, okay,
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Speaker 2: there's so many questions, but what is Dave Calhoun today
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Speaker 2: going to face from Congress and then in the light
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Speaker 2: of these consistent whistleblower claims.
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Speaker 6: So my guess is that what Dave Calhoun's going to
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Speaker 6: say today's going to stick to the script. He's going
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Speaker 6: to say they're working on fixing all these problems. He'll
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Speaker 6: probably you know, not be able to confirm or deny
1:27
Speaker 6: sort of individual reports. We saw the report come out,
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Speaker 6: you know, the Boeing They gave us a summary of
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Speaker 6: what they provided to the FAA and their action plan,
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Speaker 6: you know, for improving the production process. It included things like,
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Speaker 6: you know, making sure they appropriately tracked faulty parts and
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Speaker 6: didn't put them in airplanes. So my guess is there
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Speaker 6: were some situations where this was a problem. But again,
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Speaker 6: I think he's not going to give a lot of
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Speaker 6: specifics today in front of Congress. I think it's he'll
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Speaker 6: stick to the script, is a plan out to fix it,
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Speaker 6: and they'll say, we got the plan and we're going
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Speaker 6: to drive on that plan.
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Speaker 3: Hey, George, I know from speaking to you in the
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Speaker 3: past and reading some of your research, one of the
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Speaker 3: challenges as it relates to quality is outsourcing. You know,
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Speaker 3: Boeing over the last number of years, ten twenty years,
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Speaker 3: is maybe outsource a little bit more of their production,
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Speaker 3: their parts and so on to third parties, and that
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Speaker 3: may be introducing some more risk into their process. How
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Speaker 3: are they talking about some of their outsourcing strategies.
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Speaker 6: So in that same report, right, they talk about inspections
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Speaker 6: at suppliers, they talk about monitoring quality at suppliers better.
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Speaker 7: Yeah.
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Speaker 6: I just think this is a it's a wholly different industry, right.
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Speaker 6: I think there's a bunch of people that have come
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Speaker 6: to the aerospace world from auto backgrounds and other mass
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Speaker 6: production backgrounds, right, And in those worlds, safety isn't as important.
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Speaker 6: Volume is a lot higher. You can get multiple suppliers
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Speaker 6: to provide products to your production line, you can work
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Speaker 6: cost on the suppliers, and I think that whole game
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Speaker 6: plan is really really difficult to do in aviation. And
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Speaker 6: I think this is part of what we're seeing. Right.
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Speaker 6: I think you can outsource, but I think if you outsource,
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Speaker 6: you know, you know, to your supplier base, I think
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Speaker 6: it's still got to be you know, a pretty strong
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Speaker 6: relationship with them, not a combative relationship where it's always
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Speaker 6: about price, because it really matters the quality you get
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Speaker 6: to your line right, safety is dependent upon it. And
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Speaker 6: so I think what we're finding out as this sort
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Speaker 6: of you know, whole Boeing saga unravels, is outsourcing and
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Speaker 6: banging up your suppliers for price just isn't a winning
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Speaker 6: strategy in aviation.
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Speaker 5: Can have they course corrected enough? Or can they so?
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Speaker 6: Look, I think they can. Everything can be fixed. I
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Speaker 6: think if you look at their competitors across the pond, Airbus,
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Speaker 6: they're not having these problems. I think Airbus has been
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Speaker 6: less combative with some of their suppliers. They're in the
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Speaker 6: middle of this correction. We know they want to buy
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Speaker 6: Spirit Aerosystems. We're still waiting to hear news on that.
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Speaker 6: There's still you know the challenge of getting some of
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Speaker 6: the other companies that Spirit supplies, to name the Airbus
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Speaker 6: probably out of the portfolio so they can recover. It's
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Speaker 6: gonna it's gonna take some time. Uh, and it's gonna
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Speaker 6: take a lot of work with our suppliers.
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Speaker 3: So, George, if I think about, you know, rethinking my
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Speaker 3: strategy with my suppliers and maybe focusing less on price
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Speaker 3: competitives maybe a little bit more on quality, does that
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Speaker 3: imply that Boeing's profit margins will be under pressure going forward.
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Speaker 6: Yeah, I mean, I think I think for sure, right,
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Speaker 6: I think you're you're not going to receive a return
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Speaker 6: to the Boeing margins you saw at the end of
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Speaker 6: last decade. I'm not gonna say ever, like in time,
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Speaker 6: perhaps they could get back to that, you know, but
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Speaker 6: I think it takes you know, it's it's gonna take
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Speaker 6: a bunch of work here near term to improve the quality,
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Speaker 6: and and that's going to cost money. Plus we already
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Speaker 6: know that some of the business they've put in the books, right,
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Speaker 6: they had some challenges delivering into China. That was kind
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Speaker 6: of the one two whammy after they had the grounding
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Speaker 6: of the Max and the crashes. We know they probably
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Speaker 6: sold a bunch of airplanes for some pretty good prices
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Speaker 6: to really core customers like United, like Southwest. So I
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Speaker 6: think that I think both, you know, both on the
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Speaker 6: cost side again, given this correction to improve the supply base,
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Speaker 6: improve production, get get capacity rolling again, as well as
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Speaker 6: some of the pricing they gave away on backfill for orders.
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Speaker 6: Means you're not looking at a Boeing that's going to
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Speaker 6: get those margins free through this decade.
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Speaker 2: I think if I look at Boeing stock, then I
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Speaker 2: mean it's down from December, it's down thirty four percent.
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Speaker 2: Does that accurately reflect then this tighter profit margin world
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Speaker 2: to sort of revamp and the course correcting that they
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Speaker 2: have to do.
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Speaker 6: So, you know, I think when you look at their valuations,
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Speaker 6: you know, their historical valuations, One, they're really high right now,
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Speaker 6: right because earnings are so low, you know, So I
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Speaker 6: think that there is a little bit of investor look
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Speaker 6: through at this point, you know, on the on the
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Speaker 6: on the current problems they have, you know, but the
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Speaker 6: sort of whether or not they're they're properly positioned for
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Speaker 6: the out years right now. I think it's all a
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Speaker 6: function of if they can you know, if they can
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Speaker 6: quickly improve the build rate so they can improve economies
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Speaker 6: of scale and start to get more profitability back into
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Speaker 6: this business, and that, you know, really remains to be seen.
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Speaker 3: George, you mentioned China. Where is Boeing in terms of
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Speaker 3: getting the seventy three seven max in the air and
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Speaker 3: China kind of how's that business looking in terms of
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Speaker 3: sales and deliveries.
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Speaker 6: So their deliveries going into China, right and uh, it
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Speaker 6: looks to us to largely be deliveries that were you know, built,
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Speaker 6: you know, when the seven three seven was grounded, and
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Speaker 6: they're starting to get some of those back into the country.
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Speaker 6: But China's also has this problem now with the flight
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Speaker 6: recorder that's been authorized by other jurisdictions, including the US.
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Speaker 6: So I mean it feels to me like China is
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Speaker 6: allowing deliveries, but they still, you know, they're still not
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Speaker 6: I don't know, maybe keen on taking a lot of
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Speaker 6: deliveries from Boeing. I haven't seen a bunch of orders
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Speaker 6: come in from China, you know, for Boeing. And so
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Speaker 6: I would say that relationship still, while it's maybe thawing
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Speaker 6: a bit, is nowhere near was it where it was
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Speaker 6: in the last decade. And they have their problems too.
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Speaker 6: Right now, I think they don't need as many airplanes,
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Speaker 6: their economy isn't growing as fast, air travel isn't growing
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Speaker 6: as fast. But I still think that relationship is not
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Speaker 6: in the right place where it should be, where you'd
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Speaker 6: like it to be. I think for Boeing.
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Speaker 2: Before I let you go any word yet on and
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Speaker 2: replacement for Dave Calhoun, Like, how's that going?
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Speaker 7: He laughed?
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Speaker 5: The answer is laughing.
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Speaker 6: Yes, what I hear from news reports is picking up steam.
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Speaker 6: But g I mean, I don't know, it's been a while.
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Speaker 6: There's a lot of conjecture. It's a hard job. There's
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Speaker 6: probably a lot of people that just aren't willing to
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Speaker 6: take it. I don't know, you know, they got to
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Speaker 6: the end of the year, and so maybe they're gonna
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Speaker 6: use it all. I don't know.
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Speaker 2: I mean, and anyone but Larry Cult that you keep
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Speaker 2: hearing about, that's for real.
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Speaker 6: So I don't really track the people that's you know,
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Speaker 6: that's kind of hard for me. I do know, like
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Speaker 6: it said, it's got to be a rock star manufacturing,
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Speaker 6: you know, sort of CEO. I don't know that there's
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Speaker 6: a lot of them left in America. I think we
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Speaker 6: do a lot of outsourcing now, so maybe that makes
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Speaker 6: it a taller order too. I don't know.
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Speaker 5: All right, Hey, Georgia really appreciate it.
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Speaker 2: George Ferguson, Bloomberg Intelligence senior Aerospace, Defense and Airlines analysts
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Speaker 2: joining us in Princeton, New Jersey.
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Speaker 5: Yes, who would have thunk? Yeah, it was a New
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Speaker 5: Jersey and.
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Speaker 3: You lovely home of hogi Haven, my favorite sandwich shop.
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Speaker 5: Also up on that.
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Speaker 3: Bowing down two percent today, down thirty three percent year
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Speaker 3: to date. You know, it just feels like a stock
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Speaker 3: No one wants to step in and really take a
9:16
Speaker 3: big position here until you see real signs of our
9:21
Speaker 3: turn around there, because it just feels like every day
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Speaker 3: there's something coming out.
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Speaker 2: And if you just time it out right, like say
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Speaker 2: they do take the rest of the year to get
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Speaker 2: a new CEO, like, let's just game that out for
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Speaker 2: a second, then the new CEO has to come in right.
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Speaker 2: Then it's a plan and it's going to be some
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Speaker 2: kind of restructuring plan in that, like how we're going
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Speaker 2: to manage the business, how we're dealing with suppliers. And
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Speaker 2: then if you they do wind up buying a Spirit Aerospace.
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Speaker 5: Then you got to integrate that. I mean that how
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Speaker 5: long a process is that?
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Speaker 7: Yep?
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Speaker 3: Exactly, So I mean and is there a value here
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Speaker 3: where it just says that I'm being compensated for that
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Speaker 3: risk and that time and I don't know, and it
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Speaker 3: just doesn't feel like it again. Stock down thirty three
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Speaker 3: percent year to date.
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Speaker 2: All right, coming up, we're gonna talk to Jill Blanchard.
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Speaker 2: She is president of Enterprise Client Solutions at Abandoned Solutions,
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Speaker 2: and we're going to get the take here on retail sales.
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Speaker 2: So retail sales barely did anything, and the narrative here
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Speaker 2: is that the consumer is strained that they're going to
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Speaker 2: buy stuff, but they're going to buy it on sale.
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Speaker 5: The rub here is that.
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Speaker 2: This is mostly a goods report versus what we're going
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Speaker 2: to get when we get consumer spending a little later
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Speaker 2: in the month, where that might be actually a services reports.
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Speaker 2: There's still questions as to as to what the real
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Speaker 2: read through is for the consumer.
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Speaker 5: Jill, what are your thoughts?
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Speaker 4: Yes, so hello and thanks for having me back. Yeah,
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Speaker 4: you know, I think I'd lead off with one big word,
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Speaker 4: and that word is cumulative. And so the effect of inflation,
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Speaker 4: the slow rise and income the high interest rates are
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Speaker 4: really having finally a cumulative effect on the consumer and
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Speaker 4: it's a really big impact there's a big difference between
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Speaker 4: inflation and affordability as well as inflation and high prices,
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Speaker 4: and so as consumers tried to get used to high prices,
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Speaker 4: if wages aren't keeping pace and they're not, it creates
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Speaker 4: a pretty big gap and drives very different behaviors. So
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Speaker 4: you mentioned promotions before, consumers are really doing a lot
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Speaker 4: of different things. They're still spending, but they are price conscious,
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Speaker 4: they're creative, they're selective. They are and I'm just going
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Speaker 4: to walk through like a myriad of strategies. They're delaying purchases.
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Speaker 4: They're trading down, whether that's a brand or a retailer,
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Speaker 4: or a product or experience. They're shopping promotions, they're price
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Speaker 4: shopping across retailer somethind of that consolidated trip. They're going
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Speaker 4: to multiple retailers. They are cutting out or reducing discretionary spending.
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Speaker 4: They're looking for larger sized products that have a more
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Speaker 4: economical value. They are sharing bolt grocery shopping. Third of
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Speaker 4: consumers are now doing that. A quarter of consumers are
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Speaker 4: skilled big meals and buying unhealthier options because of high prices.
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Speaker 4: So it's a lot of different strategies that we're seeing
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Speaker 4: come to play.
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Speaker 3: When do I don't know if we have any data
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Speaker 3: back this up, are when do consumers get used to
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Speaker 3: this new price level?
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Speaker 5: Is it?
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Speaker 3: Because it seems like we've been here for a few years,
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Speaker 3: and you know, when do we get used to it?
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Speaker 7: Yeah?
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Speaker 4: That's interesting. So I'd say it's a tale of two
12:27
Speaker 4: economies right now. And so at the macro level, we're
12:30
Speaker 4: seeing in flaten now. But when you really get underneath that,
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Speaker 4: healthier income households, you know, are you know, do do
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Speaker 4: have a healthy spend? They're driving demand, but it's balanced
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Speaker 4: out by by low and mid income households that are
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Speaker 4: curbing their spending. Now that that does split spending, that's
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Speaker 4: a shift from what we've seen over the past couple
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Speaker 4: of years because spending was really fuel by pandemic era benefits,
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Speaker 4: stockpile savings, the cessation of student loan repayments, and rapid
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Speaker 4: wage increase, so a number of things that are either
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Speaker 4: reduced or actually illuminated now creating a bifurcation in spending
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Speaker 4: amongst income households.
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Speaker 2: When we take a look at the spending problem, how
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Speaker 2: do we understand it? Because slowing versus falling off a
13:17
Speaker 2: Cliff are different and they're going to have different reaction
13:21
Speaker 2: functions for the FED.
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Speaker 5: What's the best kind of description.
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Speaker 4: Slow? I mean nothing's going to happen fast, right, I say,
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Speaker 4: there's two things to consider, you know. One is spending
13:36
Speaker 4: is never going to take a sharp turn in either direction.
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Speaker 4: It's going to slowly turn in either direction. And there
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Speaker 4: are multiple factors influencing that, you know, like the reduction
13:45
Speaker 4: in the pandemic, arab benefits and stockpile savings as well
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Speaker 4: as you know, higher prices as well as a lower
13:54
Speaker 4: wage increases right now, interest rates. So there's so many
13:57
Speaker 4: things that really affect it. I think that we can,
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Speaker 4: you know, continue to expect to see things happen slowly
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Speaker 4: over time and not be surprised by what it is
14:07
Speaker 4: that we're seeing today. It's it's been building to this
14:09
Speaker 4: for for.
14:10
Speaker 5: Many many months.
14:11
Speaker 3: Cicadas, Oh what talk to us about cicadas.
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Speaker 4: I will talk to you about cicadas. So here's something interesting,
14:19
Speaker 4: and this is you know, partly about cicadas. And I
14:22
Speaker 4: happen to live in a cicada part of the country.
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Speaker 5: It's brutal out there, the shining.
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Speaker 4: Well, so here's the thing we've talked about inflation, we
14:32
Speaker 4: talked about the slow rise in income, the high interest rates.
14:35
Speaker 4: Let's talk about the effect of on retail spending of
14:41
Speaker 4: extreme weather, which I know we've talked about before. We
14:44
Speaker 4: saw today that there's going to be record breaking temperatures
14:46
Speaker 4: in the Midwest and the Northeast. So it's it's extreme heat,
14:50
Speaker 4: it's flooding, it's fires, it's hurricanes, snowstorms, tornados. All of
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Speaker 4: those things curb outside of the home activities, which are
14:58
Speaker 4: typically a soci stated with bigger ticket spending.
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Speaker 1: So think of.
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Speaker 4: Things like going to an amusement park or a concert
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Speaker 4: versus watching Netflix, going to a lakehouse for the weekend
15:07
Speaker 4: versus staying home, going out to dinner versus staying home.
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Speaker 4: So the effect the curb on out of the home
15:14
Speaker 4: activities will translate into a different and a less retail spend.
15:19
Speaker 4: So that's somewhat having to do with cicadas. I stay
15:23
Speaker 4: in because it is life as.
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Speaker 5: Shining, really horrifying.
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Speaker 3: Where where are you, Jill? Where is this happening?
15:29
Speaker 7: I am home.
15:30
Speaker 4: Based in the Chicago market. They're pretty brutal.
15:33
Speaker 5: Interesting, man, I didn't eve think about the sit here?
15:36
Speaker 7: Do we know? We do we do.
15:37
Speaker 5: Yeah, yeah, no, I mean, like not yet, but they're
15:40
Speaker 5: they're definitely gonna come.
15:41
Speaker 3: Yeah yeah, okay, But to.
15:43
Speaker 5: Your point about extreme temperatures.
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Speaker 2: Too, because then you stay home and guess what, you
15:45
Speaker 2: pump the air conditioner because if you don't, you're dealing
15:47
Speaker 2: with one hundred degree heat and that is a huge bill.
15:49
Speaker 2: I mean, already my electricity bill has jumped by what
15:52
Speaker 2: by two just just for May and.
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Speaker 5: It wasn't even that hot. So that's going to be
15:57
Speaker 5: another impact as well.
15:58
Speaker 4: Yeah, as well as think about the damage that comes
16:03
Speaker 4: from a flood or hurricane tornado. So yeah, it really
16:07
Speaker 4: drives dollars being spent elsewhere, as well as the fact
16:10
Speaker 4: that it curves outside the home spending.
16:13
Speaker 2: Talk about then, in terms of how loyal people are
16:16
Speaker 2: to brands, like is it just going to be a
16:18
Speaker 2: pure value trade, like the lowest price that you can
16:20
Speaker 2: give me is what I'm going to buy? Or do
16:22
Speaker 2: you feel like it's going to be very selective and
16:24
Speaker 2: brand loyalty matters.
16:27
Speaker 4: So I heard somebody call this right now, and I
16:29
Speaker 4: thought it was pretty clever that we're ing that we're
16:31
Speaker 4: entering into the air of brand co miscuity, where we
16:35
Speaker 4: are essentially buying short term loyalty, but we're really creating
16:38
Speaker 4: long term disloyalty. So all those promotions buy today, but
16:42
Speaker 4: they sacrifice tomorrow. Having said that, I'd say that retailers
16:47
Speaker 4: are looking at a number of strategies. So it's not
16:49
Speaker 4: just promotions, it's their amping up their loyalty programs, their
16:53
Speaker 4: digital offers, their private label offerings. And let's talk a
16:56
Speaker 4: little bit about everyday price, right, So Walmart and Target
17:00
Speaker 4: publicly said that they plan to reduce the everyday price
17:03
Speaker 4: on thousands of items. This is a great trip driving
17:06
Speaker 4: strategy to get the consumer into their stores, especially the
17:09
Speaker 4: consumers that are struggling to buy the basics every day.
17:13
Speaker 4: And it's a real shift in what we've seen over
17:15
Speaker 4: the past two to three years, and it might mark
17:18
Speaker 4: the beginning of a price war the likes of which
17:20
Speaker 4: we haven't seen since inflation took hold.
17:23
Speaker 3: So what are retailers trying to do here? I mean,
17:27
Speaker 3: are they are they? Are they trying to keep customers?
17:31
Speaker 3: Are they are they just looking at for their own margins?
17:34
Speaker 3: What are retailers strategy here?
17:37
Speaker 4: Oh? Yes, and yes and maybe even more yeses. It
17:41
Speaker 4: is less today about a pie that's growing and it's
17:44
Speaker 4: more about stealing share versus creating demand. So somebody's win
17:48
Speaker 4: is somebody's loss again, could be a brand, a retailer,
17:51
Speaker 4: or a product choice. And so retailers you know, are
17:54
Speaker 4: trying to are trying to get purchases and consumers that
17:58
Speaker 4: they might not normally get and or have recently lost.
18:02
Speaker 4: One of the things that we're seeing now that's really
18:05
Speaker 4: interesting is both manufacturers and retailers trying to sell you know,
18:10
Speaker 4: call it non traditional products and non traditional outlets. And
18:13
Speaker 4: so you could expect to see health and beautycare products
18:16
Speaker 4: at a Dick Sporting Good, maybe some more food products
18:19
Speaker 4: at a TJ Max, And so they're really trying to
18:21
Speaker 4: get new avenues and distribution to get those consumers in store.
18:26
Speaker 4: A flip version of that is if you look at
18:29
Speaker 4: the dollar channel, the dollar channel has traditionally owned that
18:32
Speaker 4: you know, that lower price point or that opening price point,
18:36
Speaker 4: that so many other retailers are now entering into the
18:39
Speaker 4: smaller pack sizes for that opening price point and really
18:43
Speaker 4: getting that volume from the dollar stores.
18:46
Speaker 5: Wow, that's really interesting. It's true.
18:47
Speaker 2: As a frequent user of TJ Max, I do notice
18:49
Speaker 2: that there are is more packaged food, the home good store.
18:52
Speaker 2: Oh my god, it's everywhere on the half of it
18:55
Speaker 2: feels like it's food. Now, just to wrap this conversation
18:59
Speaker 2: up as we go to sort of the Fed, let's
19:01
Speaker 2: just pretend the FED cuts one or two times this year?
19:03
Speaker 5: Did they say one? Market says two?
19:05
Speaker 2: Does that matter for the consumers that we are talking about.
19:08
Speaker 2: Does that materially change kind of what they buy and
19:10
Speaker 2: how they spend long term?
19:13
Speaker 4: Yes, near in, not as much as we would think.
19:16
Speaker 4: It will have a little bit of an effect. But again,
19:18
Speaker 4: cumulative is really the word of the day here, and
19:22
Speaker 4: that it takes a while for any of these effects
19:25
Speaker 4: to catch up to the consumer. So what we're seeing
19:28
Speaker 4: today is the effect of what's been happening over the
19:31
Speaker 4: past twelve to twenty four months, and so it will
19:34
Speaker 4: have an effect, but not as big of an effect.
19:36
Speaker 4: Near In.
19:38
Speaker 3: Hey, Jill, thanks so much for joining us. They really
19:40
Speaker 3: appreciate it. Joe Blanchard, president of Enterprise Client Solutions at
19:43
Speaker 3: Advantage Solutions, on Zoom from Cicada infested Illinois.
19:50
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
19:54
Speaker 1: weekdays at ten am Eastern on Effo Cardplay and then
19:57
Speaker 1: broud outo with the Bloomberg Business app demand wherever you
20:01
Speaker 1: get your podcasts, or watch us live on YouTube.
20:05
Speaker 2: One other stock we're watching is Lenar, down by almost
20:07
Speaker 2: three percent. So there's a homebuilder and it forecasted that
20:11
Speaker 2: deals in the third quarter.
20:13
Speaker 5: Missed consensus expectations.
20:15
Speaker 2: And then Barkley's pointed out that if you take a
20:16
Speaker 2: look at their fourth quarter guidance, it implies a very
20:19
Speaker 2: large ramp up in gross margins in that quarter, and
20:22
Speaker 2: investors are a little skeptical as to whether or not
20:24
Speaker 2: that actually is going to happen. So no one to
20:26
Speaker 2: turn to but Drew reading Bloomberg Intelligence home builder analysts.
20:29
Speaker 2: He joins us now from Princeton, New Jersey. Hey, Drew,
20:32
Speaker 2: I don't know. I thought it was all like, we
20:34
Speaker 2: don't have enough supply.
20:35
Speaker 5: This is bullish for builders. So what happened?
20:38
Speaker 7: Well, I think you framed it perfectly. The story with Lenar,
20:41
Speaker 7: why the stock sound? Is it so much about what's
20:43
Speaker 7: happening with the volumes they deliver good orders? They're up
20:46
Speaker 7: nineteen percent, they maintain their four year guidance for eighty
20:49
Speaker 7: thousand home closings. It has to do with their outlook
20:52
Speaker 7: for gross margin, they guided to about one hundred basis
20:56
Speaker 7: points below what the street was looking for, and as
20:58
Speaker 7: you mentioned, that would work quire a ramp in the
21:00
Speaker 7: fourth quarter to about twenty five percent. So, like you said,
21:03
Speaker 7: there's definitely some skepticism and their ability to meet their
21:07
Speaker 7: four year outlook. The reason for that is because we
21:10
Speaker 7: saw rates move up as high as seven and a
21:12
Speaker 7: half percent during the quarter. You know, they've come back
21:15
Speaker 7: in a little bit, but we're seeing their need to
21:17
Speaker 7: incentivize buyers remain elevated, and that's what's impacting profitability.
21:22
Speaker 3: So where are we in that activity there? If I'm
21:24
Speaker 3: if I'm looking at a seven percent mortgage, what are
21:27
Speaker 3: they going to do for me?
21:29
Speaker 7: Yeah, So typically what we're seeing is that the builders
21:32
Speaker 7: will maintain a spread versus the headline rate. So if
21:34
Speaker 7: you're seeing seven and a half percent in the market,
21:37
Speaker 7: typically you're going to get six percent from a builder.
21:40
Speaker 7: You know, there are some other builders and depending on
21:42
Speaker 7: the market, depending on how strong the market is, what
21:45
Speaker 7: demand looks like, they could get you into the fives.
21:48
Speaker 7: But obviously that's going to cost them on the gross
21:50
Speaker 7: margin line. So the incentives they're using are certainly working,
21:54
Speaker 7: it's just what's the cost.
21:55
Speaker 2: So that one hundred percent the one hundred bases point miss,
21:58
Speaker 2: but then keeping their guidance for ro's margin for the year,
22:01
Speaker 2: that must imply that they're looking for rake cuts.
22:05
Speaker 7: Yeah, I think a lot of it has to do
22:08
Speaker 7: with what they're doing on the call side. One of
22:10
Speaker 7: you know, Lenar's emphasis for their business over the last
22:15
Speaker 7: several years has really been running a more efficient manufacturing
22:18
Speaker 7: based business where they're not necessarily just chasing volume, but
22:22
Speaker 7: they're doing it the right way. They're fine tuning their
22:25
Speaker 7: floor plans, they're pushing back on their suppliers. You have
22:28
Speaker 7: to remember they're one of the second largest builder in
22:31
Speaker 7: the country, but they're one of the only builders who
22:33
Speaker 7: has scale at the national level, so they're able to
22:36
Speaker 7: leverage that and kind of push back a little bit.
22:38
Speaker 7: So certainly some of the benefit that they expect in
22:41
Speaker 7: foro Q, I would assume is going to come from
22:43
Speaker 7: what they're doing on the calls side, as well as
22:45
Speaker 7: fixed leverage from higher deliveries. But nonetheless that's still going
22:49
Speaker 7: to be the focal point for investors is how do
22:51
Speaker 7: they get there?
22:52
Speaker 5: How much?
22:52
Speaker 3: I mean, I remember this back in the beginning of
22:54
Speaker 3: the pandemic, lumber went crazy. Where are we in lumber
22:58
Speaker 3: and help? How is that a part of their gross margin?
23:03
Speaker 7: Sure so, lumbers about ten percent of the cogs for builders,
23:06
Speaker 7: so it's certainly the most important input costs. As you
23:09
Speaker 7: would expect, you know, lumber prices have come back down
23:13
Speaker 7: a lot, so builders have been benefiting on the margin side.
23:16
Speaker 7: I think we've seen more stabilization of late, perhaps a
23:19
Speaker 7: little rise to the upside, but really lumbers not impacting
23:22
Speaker 7: the business in as significant a way as it was
23:25
Speaker 7: over the last couple of years.
23:27
Speaker 2: So KB home reports after the bell today, right, So
23:29
Speaker 2: what kind of company is KB home versus Lenar and
23:32
Speaker 2: has that set up KB home for today?
23:36
Speaker 7: Sure so, KB is predominantly focused on the entry level business.
23:39
Speaker 7: It's about fifty percent or more of their total sales.
23:43
Speaker 7: So in addition to just focus on broadly on the
23:46
Speaker 7: entry level, we look at what they're doing from an
23:48
Speaker 7: asp perspective to get a more holistic look. And they're
23:51
Speaker 7: actually one of the more affordably priced builders, particularly when
23:55
Speaker 7: you compare them to the resale market and against you know,
23:59
Speaker 7: their public peers. So I think from a pricing perspective,
24:02
Speaker 7: they're pretty well positioned, so they'll give us a good
24:05
Speaker 7: sense what's happening on the lower end of the market.
24:08
Speaker 7: With that being said, as you would expect, entry level
24:10
Speaker 7: buyers are much more price sensitive. They're more sensitive to
24:13
Speaker 7: that monthly payment and what's happening with rates. And we
24:16
Speaker 7: saw that earlier with a low end builder LGI Homes
24:19
Speaker 7: who's looking to take buyers out of a rental situation
24:22
Speaker 7: and put them into a home, and we saw relative
24:25
Speaker 7: weakness there. I think what you see from some of
24:28
Speaker 7: the other builders is maybe a little bit more of
24:30
Speaker 7: a higher end entry level buyer, maybe duel income who's
24:33
Speaker 7: waited a little longer to purchase. So there still has
24:35
Speaker 7: been relative strength, but we'll get a good read on
24:37
Speaker 7: that buyer today.
24:39
Speaker 3: What are the companies tell you about their expectations for
24:42
Speaker 3: interest rates mortgage rates? What are they think is going
24:44
Speaker 3: to happen?
24:46
Speaker 7: So I think the expectation broadly is that mortgage rates
24:49
Speaker 7: will start to come in a little bit as we
24:51
Speaker 7: get through the end of the year. I don't think
24:52
Speaker 7: they're managing their business for any you know, significant dropping
24:56
Speaker 7: rates back to you know where we were previously. But
24:59
Speaker 7: I think as a builder from a demand perspective, if
25:02
Speaker 7: we get rates coming back to the six and a
25:03
Speaker 7: half percent range, you know, that's pretty much a sweet
25:07
Speaker 7: spot for them. You know, we've heard that as you
25:09
Speaker 7: get to five and a half percent, that's really when
25:12
Speaker 7: demand in the market starts to move. So the fact
25:15
Speaker 7: that if we can get to six and a half
25:16
Speaker 7: they're buying down rates one hundred basis points, I think
25:18
Speaker 7: they'll continue to do well. And you know what's interesting
25:22
Speaker 7: is the public builders are kind of at the top
25:25
Speaker 7: of the food chain as it comes to housing. You
25:27
Speaker 7: have to realize they're generating about fifty percent market share
25:31
Speaker 7: compared to call it thirty eight percent prior to the pandemic, really,
25:35
Speaker 7: so they've really leveraged that lack of inventory in the
25:37
Speaker 7: resale market and the struggles among some of the smaller
25:41
Speaker 7: private piers, and they've capitalized on it.
25:43
Speaker 2: So when you say we have to the five and
25:45
Speaker 2: a half percent is kind of a nice sweet spot.
25:47
Speaker 2: So that implies the Fed Funds rated six and a
25:49
Speaker 2: half percent, and the home builders still give thee hundred
25:52
Speaker 2: bases point discount. When the Fed Funds rate gets to
25:54
Speaker 2: five and a half percent, do the builders still offer
25:57
Speaker 2: that one hundred basis point discount.
26:00
Speaker 7: I think it's going to depend on what the broader
26:03
Speaker 7: macro economic situation looks like. If we get a pullback
26:06
Speaker 7: in rates, you know, a modest pullback, and we are
26:10
Speaker 7: still dealing with a pretty solid labor market, I think that,
26:14
Speaker 7: you know, builders will be able to definitely pull back
26:16
Speaker 7: on their use of incentives. I don't know that they'll
26:19
Speaker 7: go away all together, because at this point that's something
26:21
Speaker 7: that buyers are looking to and it certainly made their
26:24
Speaker 7: product more attractive. If we get a significant pullback in
26:28
Speaker 7: rates and it's because you know, the economic situation has
26:31
Speaker 7: deteriorated further, that's obviously more of a concern and we
26:35
Speaker 7: would see them probably push incentives even harder.
26:38
Speaker 3: What kind of homes are builders building these days, Drue.
26:41
Speaker 3: Is it the mcmanson where they can get the big
26:43
Speaker 3: profit margin or are they building what the market actually needs,
26:46
Speaker 3: which is some of these entry lever homes.
26:49
Speaker 7: Yeah, that's a great question, and we've seen one of
26:52
Speaker 7: the primary ways that builders are addressing the affordability equation.
26:57
Speaker 7: It's through smaller square footage floor plans. It's a shift
27:00
Speaker 7: most of them have done. We've seen it over the
27:02
Speaker 7: last couple of years more targeted towards the entry level.
27:06
Speaker 7: Interestingly enough, you even have someone like a Toll Brothers,
27:09
Speaker 7: who you traditionally think of as that luxury builder within
27:13
Speaker 7: the builder space, they've shifted to what they call affordable luxury.
27:16
Speaker 7: Now it's still not something that the masses are going
27:19
Speaker 7: to be able to afford, but it's certainly a lower
27:21
Speaker 7: price point that, as I said before, is attracting those
27:24
Speaker 7: more well healed, duel income buyers. So every builder has
27:27
Speaker 7: kind of attacked affordability in a different way, but I
27:30
Speaker 7: think square footage has been something consistent across the group.
27:33
Speaker 2: We only have about like forty five seconds left, But
27:35
Speaker 2: what's a builder that's kind of pulling on all levers
27:38
Speaker 2: correctly right now?
27:40
Speaker 7: I think Lenar is actually an interesting case, and the
27:44
Speaker 7: while the guidance may have disappointed a little bit, they're
27:47
Speaker 7: really delivering on what they said they're going to do.
27:49
Speaker 7: They're focused on price over pace and they're willing to
27:52
Speaker 7: sacrifice a little bit of gross margin to do so.
27:54
Speaker 7: And the idea is that they're going to generate a
27:57
Speaker 7: ton of cash that they can use to pay down
27:59
Speaker 7: debt return case to shareholders, which is something investors obviously
28:02
Speaker 7: like all right, he Drew.
28:04
Speaker 5: Really appreciate it, really great stuff.
28:05
Speaker 2: You're reading a Bloomberg Intelligence joining us on the NARS Earning.
28:09
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
28:13
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28:17
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28:20
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28:23
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28:28
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28:30
Speaker 3: a Bloomberg Interactive Brokers studio, or streaming live on YouTube
28:33
Speaker 3: as well, So just head over to YouTube dot com
28:36
Speaker 3: and search for Bloomberg podcasts. Let's turn our attention to healthcare.
28:40
Speaker 3: How about this. Japan is dealing with rising cases of
28:44
Speaker 3: a disease caused by a rare flesh eating bacteria that
28:47
Speaker 3: can kill people within forty eight hours. Health authorities have
28:50
Speaker 3: reported over one thousand cases of streptocockle toxic syndrome. How
28:55
Speaker 3: about that as of early June, higher than the record
28:57
Speaker 3: nine hundred and forty one cases reporter for all of
28:59
Speaker 3: twenty twenty three. At the current rate of infection, experts
29:03
Speaker 3: fear the number of cases in Japan can reach twenty
29:06
Speaker 3: five hundred this year. For more on the story, we
29:08
Speaker 3: check out on Meshadalogia, Senior scholar at the Center for
29:12
Speaker 3: Health Security at John Hopkins Bloomberg School of Public Health. Uh,
29:15
Speaker 3: doctor Adalgia thinks, so much for joining us. Can you
29:17
Speaker 3: tell us about streptococcle toxic shock? What is it?
29:21
Speaker 5: N by the way I job tell us about it?
29:25
Speaker 8: So this is just this is Streptococcus is a bacteria
29:29
Speaker 8: that all of us have dealt with. It's the same
29:31
Speaker 8: bacteria that causes strep throat. What can happen though in
29:35
Speaker 8: certain individuals is it can be a much more severe
29:38
Speaker 8: infection where it can cause what we call, you know,
29:42
Speaker 8: necrotizing or flesh eating type of skin infections and then
29:46
Speaker 8: also spread systemically and cause multiple different organ systems to
29:50
Speaker 8: shut down. So that's when we use the kind of
29:52
Speaker 8: term toxic shocks. And it was said that bacteria basically
29:56
Speaker 8: disseminates toxins throughout your whole body and it's a very
29:58
Speaker 8: serious illness with high levels of morbidity immortality.
30:02
Speaker 5: Doctor, Is this new or is this always been the case?
30:06
Speaker 8: It's always been the case. But what's new is that
30:08
Speaker 8: in Japan post pandemic, they've reported at least two years
30:11
Speaker 8: where they've had higher than normal cases and trying to
30:14
Speaker 8: unravel the mystery of why that change in epidemiology occurred
30:18
Speaker 8: is what's getting headlines right now. But streptococcal toxic SHOCKSIM
30:21
Speaker 8: has been around forever. It's just this increase in Japan
30:25
Speaker 8: that people are interested in.
30:28
Speaker 3: How do the medical professionals, how are they treating this?
30:33
Speaker 8: So the mainstay is going to be antibiotics, but because
30:36
Speaker 8: it's this systemic toxin disease, we often give other drugs
30:38
Speaker 8: to modulate the immune system, and if there are elements
30:43
Speaker 8: of flesh eating disease going on, they basically have to
30:46
Speaker 8: do extensive surgery to kind of cut ahead of the infection.
30:50
Speaker 2: Oh my god, this sounds terrible. How quickly does this happen?
30:54
Speaker 2: I mean, you know strep can come on really quickly
30:58
Speaker 2: and it might take you a couple of days to
30:59
Speaker 2: realize that you have it.
31:00
Speaker 5: Like, what's the cycle for this?
31:03
Speaker 8: Well, when you get into that toxic shock syndrome spiral,
31:07
Speaker 8: it's very fast. They can be dramatic, you know, even
31:10
Speaker 8: in an hour can be a major difference in a patient.
31:13
Speaker 8: But It's important remember that not everybody that gets a
31:14
Speaker 8: strep infection is going to get it's still rare, and
31:18
Speaker 8: the most people who have a strep infection of their
31:20
Speaker 8: throat or if their skin, it's going to turn out
31:22
Speaker 8: to be kind of a garden variety infection. But it
31:24
Speaker 8: is important for clinicians to keep in mind that if
31:28
Speaker 8: people are getting worse, if they're not getting better, if
31:30
Speaker 8: they're more concerning systemic symptoms occurring, that they think about this.
31:35
Speaker 8: And it's also important for patients to know that as well,
31:37
Speaker 8: that if they're not getting better in the expected time,
31:39
Speaker 8: or they're taking a turn for the worst when they're
31:40
Speaker 8: already on antibiotics, that this is something where they need
31:43
Speaker 8: to seek care immediately.
31:45
Speaker 3: Is there any reason why it would be I guess
31:48
Speaker 3: localized in Japan here to anything that is unique to.
31:53
Speaker 8: That part of the world, not particularly, I mean, we've
31:56
Speaker 8: seen increases in streptococal infections, not necessarily toxic shock, all
32:01
Speaker 8: over all over different countries. For example, the UK had
32:04
Speaker 8: a major issue with this a couple of years ago,
32:06
Speaker 8: and it may be having to do with kind of
32:08
Speaker 8: idiosyncrasies in the immunity in the population in Japan. Remember,
32:12
Speaker 8: we all came through a pandemic where there was a
32:13
Speaker 8: lot of social distancing and many of the ordinary infections
32:17
Speaker 8: that people get every year were kind of disrupted. And
32:21
Speaker 8: there may have been different disruptions in different parts of
32:23
Speaker 8: the world and different prevalences of these infections, and now
32:27
Speaker 8: they're kind of coming back to their prior levels and
32:31
Speaker 8: there's some catching.
32:32
Speaker 7: Up to do.
32:32
Speaker 8: There are people who might not have had as much
32:34
Speaker 8: immunity because they weren't exposed at a low level over
32:36
Speaker 8: the last couple of years, or they just might not
32:38
Speaker 8: have been infected. And there's a certain number that are
32:41
Speaker 8: going to be expected every year in Japan, and because
32:43
Speaker 8: you had a two year lull, now it's coming back
32:48
Speaker 8: to baseline levels and that's what they're noticing. So this
32:50
Speaker 8: is kind of one of the leading hypothesis. But we
32:52
Speaker 8: don't know quite everything for sure what's going on in Japan,
32:54
Speaker 8: but that's what I think is at play.
32:56
Speaker 2: What are the sign you mentioned that if you're on
32:58
Speaker 2: antibiotics for strap and you know, get better, but you
33:00
Speaker 2: get worse. What are some other signs that people should
33:03
Speaker 2: be looking out for.
33:05
Speaker 8: Well, so severe a spreading rash that's getting severe, severe
33:09
Speaker 8: pain if there's a rash where the infection might have been,
33:12
Speaker 8: anything involving low blood pressure, extreme fatigue, not being clear mentally,
33:18
Speaker 8: difficulty breathing, all of those kind of signs that the
33:21
Speaker 8: infection is not localized.
33:24
Speaker 3: Nic doctor. I remember we used to talk to you
33:26
Speaker 3: all the time during the pandemic. You were very kind
33:28
Speaker 3: to share your time and you know, kind of educate
33:30
Speaker 3: a lot of folks on what this virus was, how
33:34
Speaker 3: doctors and health professionals were treating it, and then ultimately
33:37
Speaker 3: the vaccine and the efficacy of the vaccine. So we
33:40
Speaker 3: again appreciate all that time you gave us. Now that
33:43
Speaker 3: we've got that in the rear view mirror here, I
33:45
Speaker 3: know one of the themes that came out of that
33:48
Speaker 3: was just the stress on the healthcare system and the
33:51
Speaker 3: people of the healthcare system that doctors and nurses and
33:54
Speaker 3: everybody of the work they had to be in the
33:57
Speaker 3: front lines during those early months and in that year.
34:01
Speaker 3: How are the folks, the good folks at Johns Hopkins
34:03
Speaker 3: that you deal with in the facilities, how are they
34:06
Speaker 3: doing several years on now?
34:08
Speaker 8: Well, I think that most healthcare systems around the country
34:11
Speaker 8: have kind of come to a new normal where there's
34:14
Speaker 8: kind of chronic burnout, there are chronic staffing issues where
34:18
Speaker 8: people quite haven't recovered from the way that the pandemic
34:22
Speaker 8: altered hospital operations. And this is going to be one
34:26
Speaker 8: of the long tails of the pandemic. It's not something
34:29
Speaker 8: that you can just bounce back from. There wasn't a
34:31
Speaker 8: lot of resiliency built into the system. There wasn't a
34:33
Speaker 8: lot of kind of slack in it, and the pandemic
34:36
Speaker 8: ate up all that slack. And I just think that
34:39
Speaker 8: we're in a situation where a lot of people still
34:43
Speaker 8: are carrying those scars around of that time when they
34:46
Speaker 8: were overworked, where there were concerns about personal protective equipment,
34:50
Speaker 8: where hospitals were crashing, and even when you look at
34:52
Speaker 8: the economics of hospitals, we're seeing hospitals closed, rural hospitals
34:57
Speaker 8: really looking at their financial viability hospital banker. So this
35:01
Speaker 8: was something that took a major toll on the healthcare system,
35:03
Speaker 8: just like we expected and predicted it with And this
35:06
Speaker 8: is why it's so important to incorporate healthcare preparedness, healthcare
35:09
Speaker 8: resiliency into planning for the next infectious disease emergency, whatever
35:14
Speaker 8: it might be. This can't just be something that we
35:16
Speaker 8: think about when there's a crisis, when it's in the headlines.
35:19
Speaker 8: This is something that needs to be done kind of
35:21
Speaker 8: with a long term eye to the future to make
35:24
Speaker 8: a sustainable way to operate hospitals and make emergency prepared
35:29
Speaker 8: and as part of their core function.
35:32
Speaker 2: How are we doing with COVID? I mean, COVID loves me.
35:35
Speaker 2: It doesn't love Paul, but it loves me. How are
35:38
Speaker 2: we doing with COVID? What are the cases like? Where
35:41
Speaker 2: are we going to get vaccinations in the fall for
35:43
Speaker 2: fluen covid?
35:44
Speaker 5: What do you think?
35:48
Speaker 8: Well, COVID is something that's increased over time in the
35:50
Speaker 8: last several weeks or so. But we've seen is this
35:53
Speaker 8: virus is endemic, but it continues to mutate and spin
35:57
Speaker 8: off new variants that are able to infect us. Right now,
36:00
Speaker 8: all across the country, COVID cases are up, emergency department
36:03
Speaker 8: visits are up, but its ability to cause severe disease,
36:06
Speaker 8: its ability to crush the hospital severely constrained. Because of
36:09
Speaker 8: the community and the other tools that we have. We
36:11
Speaker 8: will have new vaccines in the fall that are better
36:14
Speaker 8: targeted to what's circulating and that will likely be something
36:18
Speaker 8: that's recommended to high risk individuals that they get right
36:20
Speaker 8: alongside their flu vaccine.
36:23
Speaker 3: All right, doctor George, thank you so much. We appreciate
36:26
Speaker 3: that as always. Doctor almesh Adology a senior scholar to
36:29
Speaker 3: Center for Health Security at Johns Hopkins Bloomberg School of
36:33
Speaker 3: Public Health. And again, the good folks at Johns Hopkins
36:36
Speaker 3: were so good to us, you know during those early
36:38
Speaker 3: days when we didn't know anything nothing.
36:40
Speaker 2: I actually want to say, we should get him back
36:42
Speaker 2: when there's not a crisis, just to like learn about
36:44
Speaker 2: stuff that isn't a flesh eating disease, right that comes
36:47
Speaker 2: from strap or like COVID spreading again, just to like
36:50
Speaker 2: learn about the system and like what cool things are
36:53
Speaker 2: in the pipeline to be discovered and what people are treating.
36:55
Speaker 5: And I mean everyone's living longer, yep.
36:57
Speaker 2: Right, we're letting people live longer, but then how we
37:00
Speaker 2: support them really fails. And then getting that dynamic from
37:03
Speaker 2: him and be super interesting yep.
37:04
Speaker 3: I went into a healthcare episodic for the first time
37:06
Speaker 3: yesterday and I can't remember how long and X rays.
37:10
Speaker 3: I mean what I was interesting to see, like how
37:12
Speaker 3: well it was staff, Like are there nursing shortages are there,
37:16
Speaker 3: you know, technician shortage, and it seemed like it was
37:19
Speaker 3: back to normal. There's plenty of folks there, you know,
37:22
Speaker 3: a few masks here and there from some of the
37:23
Speaker 3: healthcare professionals. But it seemed like pre pandemic business as usual.
37:28
Speaker 3: But I get as doctor Dalga was saying, there's some
37:30
Speaker 3: long tail issues for the industry as a whole. I guess,
37:33
Speaker 3: you know, they were so crushed. I think about the
37:35
Speaker 3: hospitals here in New York City that were so crushed.
37:37
Speaker 5: You should just see, like the ers are crazy, like
37:40
Speaker 5: they're just overflowing. It didn't take days to get a bed.
37:42
Speaker 5: And yeah, it's just it's it's the healthcare systems and
37:46
Speaker 5: real issues with that.
37:49
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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38:00
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38:08
Speaker 2: I'm Alex Thee alongside Paul Sweeney. This is the Boomberg
38:10
Speaker 2: Intelligence Radio. We bring you all the top news and
38:12
Speaker 2: business and finance live from an interactive Brokers studio right
38:15
Speaker 2: here in midtown Manhattan now for the month of June,
38:18
Speaker 2: Bloomberg Radio is committed to bringing you segments and guests
38:21
Speaker 2: focus on the topic of equality. And today we have
38:24
Speaker 2: the pleasure of speaking with a Lalua Ganga. She's US
38:27
Speaker 2: Chief investment Officer over at Mercer. She is a rock
38:31
Speaker 2: star in her own right as an investment analyst and
38:34
Speaker 2: a portfolio diversifier and talk about clients and.
38:38
Speaker 5: All those things.
38:39
Speaker 2: And also she is in the C suite and also
38:42
Speaker 2: working mom and that's hard, so we can cover both.
38:46
Speaker 2: So can you just tell me a little bit about
38:48
Speaker 2: you know, your career and how you got to where
38:50
Speaker 2: you were.
38:53
Speaker 9: Well, thank you for having me. I heard the introduction
38:56
Speaker 9: to kind and I just started laughing because my daughter
38:58
Speaker 9: would just be like, that's just.
38:59
Speaker 5: Mom, Yeah, totally.
39:01
Speaker 2: I can appreciate that that is what happened.
39:05
Speaker 9: So, you know, I there are days that I take
39:09
Speaker 9: a step back and I look at my career and
39:12
Speaker 9: I'm I'm even blown away and surprised. Frankly, I've had
39:18
Speaker 9: the privilege of being in the US. I moved here
39:21
Speaker 9: for college. I'm originally from Nigeria. My family's from Nigeria,
39:26
Speaker 9: born and raised both in Nigeria and Botswana, and I
39:30
Speaker 9: moved in nineteen ninety nine. I studied math. Didn't know
39:34
Speaker 9: what I was going to do with it. It was
39:36
Speaker 9: somewhat accidental. I was trying to find a place that
39:38
Speaker 9: gave work visas.
39:40
Speaker 3: Yep, such a big air.
39:42
Speaker 9: Got to be a big firm, and my family science based.
39:46
Speaker 9: I ended up working at a bank because big hires
39:51
Speaker 9: and they gave visas back in the day, and it
39:53
Speaker 9: was a trading desk, and all I could think I
39:56
Speaker 9: was I did to work really hard to keep this visa,
40:00
Speaker 9: and I learned about markets. I learned about trading. I
40:03
Speaker 9: realized that in order to stay here, I had to
40:06
Speaker 9: in my head work harder than everybody else and just
40:09
Speaker 9: show that I truly wanted it. And I was a
40:12
Speaker 9: student of markets. I just loved learning. And over time,
40:16
Speaker 9: I was fortunate that folks saw me and gave me
40:20
Speaker 9: a chance and opportunity to do more. I raised my
40:23
Speaker 9: hand and I asked for more, and you know, fast forward,
40:28
Speaker 9: I don't know, twenty something years or more, I'm the
40:33
Speaker 9: chief investment officer at one of the most major prominent
40:39
Speaker 9: platforms for in Dowmon's Foundation's healthcare pensions. Like the assets
40:45
Speaker 9: and the responsibility that we have blows me away, and
40:47
Speaker 9: I take it very seriously and I'm just truly grateful
40:50
Speaker 9: to be in the seat.
40:52
Speaker 3: Women in financial services on Wall Street a constant challenge,
40:57
Speaker 3: and in my prior role, I hired a lot of
41:00
Speaker 3: folks coming out of school, and our entering classes were
41:05
Speaker 3: perfectly diverse, perfectly diverse. Ten years later when it came
41:08
Speaker 3: time for the managing director or a partner discussion, not
41:12
Speaker 3: so much yep. So what was your experience going through
41:16
Speaker 3: this whole process? Having spend that much time in the business.
41:20
Speaker 9: I knew that I had to not think about it.
41:24
Speaker 9: It was a deliberate choice to not think about it,
41:26
Speaker 9: because if I did, and you look at the numbers, like,
41:29
Speaker 9: it's very easy to be discouraged. It's very easy to
41:33
Speaker 9: say I don't see it, So how can I think
41:35
Speaker 9: it and be it? And make no mistake, I did
41:38
Speaker 9: think it very often, but I just had to actively
41:41
Speaker 9: put it out of my mind. And there are certain
41:45
Speaker 9: points that you have as a woman, your choice of
41:49
Speaker 9: a partner, your choice of having a family, and when
41:53
Speaker 9: you do that, how much time you spend with I
41:58
Speaker 9: have a daughter, she's turning five in a few weeks.
42:02
Speaker 9: There are points that you will be slower in your
42:04
Speaker 9: career as a result of that. It's also a choice
42:07
Speaker 9: and there are times that you have the ability to
42:09
Speaker 9: do it. For me, I found that it's been support
42:12
Speaker 9: and the support system around me.
42:15
Speaker 5: And you mean like personal or job wise or both both?
42:18
Speaker 9: Yeah, definitely both. The if the job wise is like
42:23
Speaker 9: you can do this job, and personally it's hard, you
42:26
Speaker 9: have to make that choice. A lot of women are like,
42:28
Speaker 9: I will choose and it won't be you. It won't
42:30
Speaker 9: be you job, it will be the family because that's
42:33
Speaker 9: you know, at the end of the day, when we
42:35
Speaker 9: leave this world, that's what matters the most. So when
42:39
Speaker 9: put in a situation where you have to choose, and
42:41
Speaker 9: many people are in situations whereby they have to choose,
42:44
Speaker 9: they don't choose work. So how you have the support
42:49
Speaker 9: in place to be able to have both, which you
42:52
Speaker 9: can't have them at the same time at the same intensity.
42:56
Speaker 9: You know you can have it, but you have to
42:57
Speaker 9: stage like sad, my daughter's five are going to be five.
43:01
Speaker 9: So I had children later in life in order to
43:04
Speaker 9: be able to go as fast as I could without
43:07
Speaker 9: making some of those other trade offs, and then having
43:10
Speaker 9: the support system in place while you are doing the worst.
43:13
Speaker 5: So I love that you brought up support.
43:14
Speaker 2: I had a dinner last week with a bunch of
43:17
Speaker 2: women in finance, super successful, really great, and eventually it
43:20
Speaker 2: turned to the topic of they couldn't do those jobs,
43:23
Speaker 2: and it either could I without a really supportive partner,
43:26
Speaker 2: and that you learn really fast, particularly when you have kids,
43:29
Speaker 2: how supportive that partner is actually going to be, particularly
43:32
Speaker 2: when you travel. But that's hard, Like, that's not a given,
43:36
Speaker 2: particularly if you're in a if you're a woman with
43:38
Speaker 2: like a career driven role, and you put that first.
43:41
Speaker 5: That's not a given in the world, not a given
43:44
Speaker 5: at all.
43:45
Speaker 9: And you know, in life and in work, there is
43:48
Speaker 9: your ability to work hard, your intelligence, and then there
43:52
Speaker 9: is luck. And I will admit that there's there's a
43:54
Speaker 9: lot of luck that I've had. My husband, I've known
43:57
Speaker 9: since I was eighteen.
43:58
Speaker 5: Oh my goodness.
43:59
Speaker 3: So we grew up together.
44:02
Speaker 9: Essentially it was okay, you go to school, you're working,
44:05
Speaker 9: you're was going it was it was it was trade
44:08
Speaker 9: offs and who's on, who's off, How do we do
44:11
Speaker 9: it and who knew. You know, the stats in this
44:16
Speaker 9: in this country are not necessarily encouraging in that respect,
44:19
Speaker 9: But we communicate a lot, and we have honest conversations.
44:22
Speaker 9: Who's on, who's off, who, who picks up the gap
44:26
Speaker 9: and for how long?
44:28
Speaker 8: That's interesting.
44:29
Speaker 3: I think what we learned just real quickly at thirty
44:31
Speaker 3: seconds the childcare and now the elder care in this country. Boy,
44:34
Speaker 3: that's got to change. We learned that. I think during
44:36
Speaker 3: the pandemic, people who weren't aware of it, they got
44:38
Speaker 3: they became aware of it pretty quickly.
44:40
Speaker 9: Yes, absolutely, and the pandemic was a big equalizer for
44:47
Speaker 9: many family like men and women whatever. It was like
44:50
Speaker 9: everyone had to pitch up and roll up their sleeves.
44:54
Speaker 9: You could have a nanny, but could they come in Nope, right,
44:58
Speaker 9: So that was it. And then you had that plus
45:02
Speaker 9: if you had elderly parents, which my parents are not
45:06
Speaker 9: in this country, my husband had at the time, and
45:11
Speaker 9: how you're navigating that on both sides, you can get pulled, frankly,
45:16
Speaker 9: to be able to do that. During the pandemic, it
45:20
Speaker 9: was everybody was experiencing that. But if you remove the
45:23
Speaker 9: pandemic and quote unquote normal times, it's hard to be
45:27
Speaker 9: able to have that empathy in place with people that
45:30
Speaker 9: are managing a number of other personal commitments.
45:34
Speaker 2: I could talk to you for dance, so definitely come back.
45:37
Speaker 2: We can do a little bit of this. We can
45:39
Speaker 2: talk about your market views.
45:41
Speaker 5: Really amazing. Thank you so much for sharing.
45:43
Speaker 2: You're speaking a lot of what I hear about all
45:45
Speaker 2: the time and things that I go through too, So
45:46
Speaker 2: thank you for sharing that.
45:47
Speaker 5: Lalua Ganga. She's US Chief investment officer over at Mercer.
45:52
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