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Market Is Ripe For A Near-Term Pullback: Miller Tabak's Maley · Bloomberg Intelligence

0:01
Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, along
0:04
Speaker 1: with my co host of Bonnie Quinn. Every business day
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Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
0:10
Speaker 1: along with essential market moving news. Kind the Bloomberg Markets
0:13
Speaker 1: Podcast on Apple podcast or wherever you listen to podcasts,
0:17
Speaker 1: and on Bloomberg dot com. We'll just in the last minute,
0:21
Speaker 1: I'm looking at something that I haven't seen in a
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Speaker 1: long time, and that is all three major industries lower
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Speaker 1: than ASDAK has just turned lower now and is down
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Speaker 1: a tenth represent of course, the S and P down
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Speaker 1: a quarter represent and the DOAO has been down about
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Speaker 1: half a percent. But still we're talking very very small down.
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Speaker 1: Let's bring in somebody who knows a lot about records
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Speaker 1: and stock market action. Matt Melee is managing director in
0:41
Speaker 1: chief markets strologist add milleran tay Back, and he joins
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Speaker 1: us from Newton, Massachusetts. Today. Matt, we're down today, but
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Speaker 1: we're down very very small. Do we hold onto these
0:50
Speaker 1: records even as we wait for another stimulus round? You know?
0:56
Speaker 1: It's it's it's funny because this rally has been seems
0:59
Speaker 1: to be waning a little bit in the last a
1:02
Speaker 1: couple of days. Even though you know, each day we
1:04
Speaker 1: seem to try to test the all time high in
1:06
Speaker 1: the SMP and toil. This morning we got above the
1:09
Speaker 1: inter day all time high. But even when we reached
1:12
Speaker 1: that inter day all time high and uh forty five
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Speaker 1: minutes ago, the the breath the advances versus decliners were
1:17
Speaker 1: actually negative. And we've seen that kind of that breath uh,
1:22
Speaker 1: you know, pulling back recently, volume has dropped off considerably,
1:25
Speaker 1: and so people, I think, are a little bit nervous
1:27
Speaker 1: as we're making this new high. It's kind of a
1:29
Speaker 1: point where people can step back and say, geez, you know,
1:32
Speaker 1: we're up fifty percent in just five months. We have,
1:35
Speaker 1: you know, evaluations, even though that's a lousy timing tool,
1:38
Speaker 1: valuations above twenty times earnings. Uh, it's it gives people
1:42
Speaker 1: a little bit of a reason to pause, and to
1:43
Speaker 1: be honest with you, if we did pull back from here,
1:45
Speaker 1: it wouldn't be the worst thing in the world. I mean, pauses,
1:48
Speaker 1: pull backs are and even corrections are normal and healthy
1:50
Speaker 1: in any market. So, Matt, one of the the uh,
1:54
Speaker 1: the characteristics of this rally off the bottom is it's
1:57
Speaker 1: total lack of breath. It's been driven by you know
2:00
Speaker 1: or seven names, and if you pull those names out,
2:02
Speaker 1: we're actually down four percent year of her year. How
2:05
Speaker 1: concerned are you about that lack of breath? Um just
2:08
Speaker 1: from a market you know, maybe just the stability a
2:10
Speaker 1: technical perspective, Yeah, there's no question. I mean a lot
2:14
Speaker 1: of people are you know, each people are saying, well,
2:16
Speaker 1: jeezy stocks deserve to be moving higher, and and that's
2:19
Speaker 1: true to a certain degree, but it also tells us
2:22
Speaker 1: that the overall economy, the breadth of the economy is
2:25
Speaker 1: not as strong as as some people would like to think.
2:28
Speaker 1: And therefore it's I guess my point is every time
2:31
Speaker 1: we get a narrow rally, people come up with excuses
2:33
Speaker 1: why it's it's it's actually nothing to worry about. But
2:36
Speaker 1: each time it seems to be something that people should
2:38
Speaker 1: have worried about, and we do see a pullback of
2:41
Speaker 1: some sort of substance. So not a lot of people
2:46
Speaker 1: have been talking about cynicals and you know, a rotation
2:49
Speaker 1: into cyclicals, But are we really going to see a
2:51
Speaker 1: rotation in this market action we talk about, you know,
2:54
Speaker 1: the five stocks being the biggest part of the composition
2:59
Speaker 1: of a the s and it seems to me that
3:03
Speaker 1: even if we do have a rotation, it's going to
3:04
Speaker 1: be so small that it's going to be barely noticeable. Yeah,
3:08
Speaker 1: I I agree, And of course one of the things
3:10
Speaker 1: that that I worry about. Uh and again it's it's
3:13
Speaker 1: funny because I've I've actually become more constructive on the
3:15
Speaker 1: market on a longer term basis, but near term we
3:18
Speaker 1: definitely look like we're getting right for a pull back.
3:20
Speaker 1: And one of those reasons goes to what you just mentioned, Vonn,
3:23
Speaker 1: is that we talk about how well can some of
3:26
Speaker 1: these um and you know, cyclicals do if we get
3:29
Speaker 1: another round of another wave in the coronavirus. I mean,
3:33
Speaker 1: we've seen these kind of whether it's a second wave
3:36
Speaker 1: or a second half of the first wave. The weather
3:39
Speaker 1: hasn't gotten cold yet, and what we've seen from Australia
3:41
Speaker 1: and New Zealand and other places in the southern Hemisphere
3:44
Speaker 1: as the weather got colder, they did see a new wave.
3:46
Speaker 1: In fact, in Australia it was worse than the first one.
3:49
Speaker 1: So if we get that kind of thing and and
3:51
Speaker 1: we get some sort of a lockdown, I don't think
3:53
Speaker 1: it'll be anywhere near as severe as the last one.
3:55
Speaker 1: But if we get some kind of a semi lockdown,
3:57
Speaker 1: we're already seeing that with the school, with some of
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Speaker 1: the College is h that's going to make it tough
4:02
Speaker 1: for some of these cyclical stocks to rally in the
4:03
Speaker 1: way that some people think they will. All right, so
4:05
Speaker 1: we still have the pandemic risk out there. Give us
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Speaker 1: a sense of the political risk, big, big, big election
4:11
Speaker 1: coming up in November. How are you factoring that in? Well,
4:14
Speaker 1: the in the market is not factoring it at all
4:16
Speaker 1: right right now. And one of the things I mean
4:18
Speaker 1: on two things. Number one, you know, long term uh
4:21
Speaker 1: is a lot of people will point out that the
4:23
Speaker 1: Democrats have actually been better for for the stock market
4:26
Speaker 1: or uh more more more more often than not, although
4:29
Speaker 1: certainly President Trump has been uh as a GOP president
4:33
Speaker 1: has been very positive for the stock market. But but
4:35
Speaker 1: on a on a near term basis, you look at it,
4:37
Speaker 1: where what's the starting point? The starting point right now
4:39
Speaker 1: as we're moving towards the election, as we get past
4:42
Speaker 1: these conventions and really move into the election season, the
4:45
Speaker 1: market is an all time high. It's overbought on a
4:47
Speaker 1: tentacle basis, it's expensive on a fundamental basis. So if
4:51
Speaker 1: we start to see that the that the President Biden,
4:55
Speaker 1: especially if we talk about you think about Elizabeth Warren
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Speaker 1: maybe being you know, in charge of the tragury Department
5:00
Speaker 1: or in charge of even the Justice Department, that will
5:02
Speaker 1: have a negative impact on certain aspects of the marketplace.
5:05
Speaker 1: So uh, and especially if it looks like the Democrats
5:08
Speaker 1: are going to have a full sweep. I think that
5:10
Speaker 1: a longer term it may not be the worst thing
5:12
Speaker 1: in the world, but near term, with the market the
5:13
Speaker 1: way it is, people are gonna have to start to
5:16
Speaker 1: factor that in. And that's another reason why I'm more
5:17
Speaker 1: cautious on the near term prospects for the market. But
5:20
Speaker 1: what would you do about banks right now? You've always
5:22
Speaker 1: had such strong thoughts on the banks, but they're really
5:25
Speaker 1: in the duldrums. Yeah, it's really a concern. And when
5:29
Speaker 1: you get somebody like Warren Buffett, who obviously he's been
5:32
Speaker 1: you know, we we've heard all the news about him
5:34
Speaker 1: upping his position in Bank America, but then we find
5:37
Speaker 1: out he's he's pulling him back in a lot of
5:38
Speaker 1: other areas. It's still a concern for me. And now,
5:41
Speaker 1: even though interest rates have moved up a little bit
5:43
Speaker 1: in the last week or so. Uh, they're not going
5:46
Speaker 1: to go up a lot higher even if they even
5:47
Speaker 1: if they stabilize up this this kind of slightly higher level.
5:50
Speaker 1: But the other thing that really concerns me is I
5:52
Speaker 1: continue to watch these European banks. You look at the
5:55
Speaker 1: European Bank Index, it's rolling back over again from a
5:58
Speaker 1: pretty low level already, and they've been in a performing
6:00
Speaker 1: for quite some time now. It just shows that there's
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Speaker 1: some stress on the overall banking system, and I think
6:05
Speaker 1: it shows, you know, concerns about you know, whether we're
6:08
Speaker 1: going to have the situation with bankruptcies while they pick
6:12
Speaker 1: up and get past the political questions. Matt Mally, thank
6:17
Speaker 1: you so much for joining us. We appreciate they appreciate that.
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Speaker 1: Matt Mally, managing director in chief market strategist for Miller Tabek,
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Speaker 1: joining us on the phone from Massachusetts. Uh, yeah, Vonnie's
6:27
Speaker 1: I'm glad you brought up the banks because they just
6:29
Speaker 1: can't seem to get out of their way here, and
6:31
Speaker 1: yet they have a whole myriad of issues you have
6:33
Speaker 1: to deal with. As Matt suggested, those low rates and
6:35
Speaker 1: the potential right offs. It's amazing because they're one of
6:38
Speaker 1: the areas that didn't rally ever, even when people were saying, look,
6:41
Speaker 1: they're they're way under valued here. Yeah, exactly, so the
6:45
Speaker 1: whole host of issues that they have to deal with.
6:47
Speaker 1: So we'll look forward to those earnings the next quarter.
6:52
Speaker 1: It is time for Bloomberg Opinion. We're joined today by
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Speaker 1: Bloomberg Opinion calumnist Sarah Haws actually covers retail for Bloomer.
7:00
Speaker 1: She's based in Washington, d C. Sarah, A busy day
7:02
Speaker 1: today for you, Thanks for joining us. We had Walmart,
7:06
Speaker 1: Home Depot, Coals all reporting earnings today. It seems like
7:10
Speaker 1: Walmart Home Depot they're kind of seeing some benefit here
7:14
Speaker 1: from changing buying habits, but Coals not so much. What
7:17
Speaker 1: are your key takeaways? Yeah, I think that's exactly right.
7:21
Speaker 1: All of us are spending so much more time in
7:23
Speaker 1: our homes, and that clearly has been a benefit to
7:26
Speaker 1: Home Depot. People have taken on renovation projects they wouldn't
7:29
Speaker 1: have otherwise if they didn't suddenly have to have a
7:31
Speaker 1: home office, for example, or they're pulling forward renovation projects
7:35
Speaker 1: that maybe they were planning to do a year or
7:37
Speaker 1: two down the road, and so comparable sales growth. They're
7:39
Speaker 1: a booming twenty UM and Walmart also benefited from all
7:43
Speaker 1: these traumatic changes to our lifestyle. Not only are people
7:46
Speaker 1: cooking more at home, but again trying to trick out
7:50
Speaker 1: their backyards to make spending climate at home more valuable
7:53
Speaker 1: UM and enjoyable sporting goods, that kind of thing. And
7:56
Speaker 1: so those two held up fairly well in the quarter.
7:59
Speaker 1: But old, you know, consistent with what we saw in
8:02
Speaker 1: the commerce department retail sales numbers last week, clothing just
8:06
Speaker 1: continues to be a real weak spot. People are just
8:09
Speaker 1: not spending money in that product category, and that showed
8:12
Speaker 1: up in the weak results for coals in the quarter.
8:15
Speaker 1: Now that's something that you might anticipate because there are
8:18
Speaker 1: no events to go to, this very little entertaining at
8:21
Speaker 1: home and so on. So clothes you can understand. But
8:24
Speaker 1: can Walmart UM Home Depot keep up these figures even
8:29
Speaker 1: as stimulus recedes, because you know, there was that check
8:32
Speaker 1: and then there were extra unemployment insurance payments, But they've
8:36
Speaker 1: gone away for the moment, Yes, And I think that's
8:39
Speaker 1: a real risk, and I think that's why you're not
8:41
Speaker 1: seeing their stocks really pop on these results this morning,
8:44
Speaker 1: even though they beat expectations. Walmart cited repeatedly in its
8:48
Speaker 1: earnings materials that the government stimulus was a real boon
8:52
Speaker 1: for it in the quarter, that when you saw those
8:55
Speaker 1: checks in early May and June, that that was clearly
8:58
Speaker 1: propping up spending in general merchant NAE categories, And as
9:01
Speaker 1: we got deeper into July, they said, spending basically normalized,
9:05
Speaker 1: sales normalized. And so I think UH investors are looking
9:09
Speaker 1: at these results and seeing a real risk that the
9:10
Speaker 1: Congress doesn't do more to support consumers, that this strength
9:15
Speaker 1: is simply not going to be replicated. And Sarah, you
9:17
Speaker 1: wrote a fantastic column today just on this issue that
9:23
Speaker 1: you really hope that the folks in Congress are taking
9:27
Speaker 1: a look at some of these numbers that are being
9:28
Speaker 1: released it and more importantly, listen to some of the
9:31
Speaker 1: commentary by the c e O s about what they're
9:33
Speaker 1: seeing in terms of future demand. It would suggest that
9:37
Speaker 1: maybe they better get moving. Yes, exactly. I think if
9:41
Speaker 1: we don't see uh, you know, any progress out of
9:44
Speaker 1: Washington soon, it could be really destructive. You had some
9:47
Speaker 1: of them executives offering color about how the back to
9:50
Speaker 1: school shopping season is going so so far, and it's
9:52
Speaker 1: not going great. I think choppy was the word used
9:55
Speaker 1: on the Walmart call, uh, and understandably so. Right, So
9:58
Speaker 1: many parents don't even know if they're trying all that's
10:00
Speaker 1: going to be going back to school in person or virtually,
10:03
Speaker 1: and don't even know exactly what supplies to buy, you know,
10:05
Speaker 1: do you need a laptop or do you need a backpack? Um?
10:08
Speaker 1: All of those spending decisions are kind of on ice
10:10
Speaker 1: right now. Um. And so against that backdrop, and with
10:14
Speaker 1: the unemployment rate as high as it is, Uh, it's
10:17
Speaker 1: just really hard to see how the back to school
10:19
Speaker 1: season and the really crucial holiday season set up well
10:22
Speaker 1: for these retailers. If Congress doesn't take some action, are
10:25
Speaker 1: retailer is changing the mix of what's available in their stores. So,
10:28
Speaker 1: for example, is Walmarts, you know, getting rid of the
10:31
Speaker 1: backpacks just in case there won't be as much demand.
10:34
Speaker 1: Is it putting in more leisure where Yeah, Cole talked
10:38
Speaker 1: about this a bit on its earnings call this morning
10:40
Speaker 1: that it definitely is going to shift its assortment to
10:43
Speaker 1: focus more on comfy clothes, on home products because people
10:47
Speaker 1: are still spending a lot on pitching appliances and that
10:49
Speaker 1: kind of thing um really shifting its assortment to those
10:52
Speaker 1: product categories where people are still spending money. Cools also
10:57
Speaker 1: talked about cutting the total number of items that it offers,
11:01
Speaker 1: so it said by the holiday season, it expects that
11:04
Speaker 1: skew count or the number of individual items that itself
11:06
Speaker 1: to be on um and instead to really focus on
11:11
Speaker 1: a few key items that it thinks can sell really
11:13
Speaker 1: well and buying really deep into those particular items. So
11:16
Speaker 1: I think that's a change you can expect to see
11:19
Speaker 1: when you're in stores in fall and winter. Sarah, do
11:23
Speaker 1: you have the sense that retailers in general, whether it's
11:26
Speaker 1: a coals or home depot um, can continue to invest
11:30
Speaker 1: in their digital businesses, Because it just seems like the
11:33
Speaker 1: money that Amazon continues to invest in its e commerce business,
11:38
Speaker 1: whether it's fulfillment and distribution centers or just tech technology
11:42
Speaker 1: in general, is just just outstanding and it's almost hard
11:45
Speaker 1: to replicate. How about these other retailers, what are they
11:48
Speaker 1: doing in terms of investing in in their e commerce businesses?
11:52
Speaker 1: So well, all three of these retailers are trying to
11:55
Speaker 1: do is leverage their store footprint, kind of turn it
11:58
Speaker 1: into not an Alba trouss, but a help in this
12:01
Speaker 1: digital era, and one key approach to doing that is
12:05
Speaker 1: to invest in curbside pick up um. Particularly since the pandemic,
12:08
Speaker 1: this has become a really popular format, especially in the
12:12
Speaker 1: suburbs where these stores tend to have, you know, big
12:14
Speaker 1: sprawling parking lots and it's easy to kind of pull
12:17
Speaker 1: up in your car and never get out, have someone
12:19
Speaker 1: drop your items in your trunk or your back feet. Um.
12:22
Speaker 1: So they're really investing in making those services work well.
12:26
Speaker 1: And that's more complicated than you might think, because they
12:28
Speaker 1: have to think about how to allocate in store labor
12:31
Speaker 1: just pick those orders for you quickly, and they have
12:33
Speaker 1: to think about the technological experience of how you can
12:36
Speaker 1: safely let them know, hey, I'm outside and I want
12:39
Speaker 1: you to bring those items to my car now. And
12:41
Speaker 1: so I think that's where you're going to see a
12:43
Speaker 1: lot of investment from all of these retailers. Pick Up
12:46
Speaker 1: for home depot has always view to be quite a
12:48
Speaker 1: large percentage of their digital sales overall, and so I
12:52
Speaker 1: think you'll continue to see all of them lean into
12:54
Speaker 1: making that a good experience in a way to differentiate
12:56
Speaker 1: themselves from Amazon, which simply doesn't have a lot of
13:00
Speaker 1: can order outposts from which to do that. So, Sarah,
13:03
Speaker 1: how do the peers of those retailers that have been
13:06
Speaker 1: successful differentiate themselves to also be successful? So, for example, Lows,
13:10
Speaker 1: how does Lows get some market share from Home Depot?
13:15
Speaker 1: And when it comes to Walmart, obviously this this Well,
13:18
Speaker 1: there's there's no one like Walmart, but there's a petrea
13:20
Speaker 1: of dollar generals and so on. Sure, I think Walmart,
13:25
Speaker 1: you know, its advantage is always that everyday low price focus. Um,
13:28
Speaker 1: you know, Target is clearly a close competitor, and I
13:31
Speaker 1: think Walmart needs to focus on leveraging its muscle with
13:35
Speaker 1: UH suppliers and vendors right now to keep making sure
13:39
Speaker 1: it offers the lowest prices and that it continues to
13:42
Speaker 1: win on that metric. Particularly as we are heading or
13:45
Speaker 1: as we're in a recession that doesn't look to be
13:47
Speaker 1: letting up any time soon, shoppers will become more value
13:50
Speaker 1: focus and so price will be an important point of differentiation.
13:54
Speaker 1: I think Loads the focus in winning relative to Home Depot.
13:58
Speaker 1: There It's interesting, typically Lows UH store footprint is thought
14:02
Speaker 1: of as a disadvantage because it's not Its stores tend
14:07
Speaker 1: to be located in more suburban and rural areas as
14:09
Speaker 1: opposed to in dense urban areas where home depot tends
14:13
Speaker 1: to be more concentrated. UM, But that might not be
14:15
Speaker 1: such a disadvantage right now if folks in uh, those
14:19
Speaker 1: in rural and suburban areas are more willing to visit
14:21
Speaker 1: a physical store compared to those in urban areas, so
14:25
Speaker 1: kind of leveraging that could be a lover for lowest
14:28
Speaker 1: of pole and I expect we'll kind of see that
14:30
Speaker 1: in its results. It's two key results when they come
14:32
Speaker 1: out tomorrow. Sarah Holzac with all of the answer is
14:35
Speaker 1: no one. If she's in Washington, d C. I hope
14:38
Speaker 1: they listened to her down there. So Holza is columnist
14:40
Speaker 1: with Bloomberg opinion on retail primarily, but it turns her
14:44
Speaker 1: home to a lot of topics. Well, the housing market
14:50
Speaker 1: is the one area of this economy that continues to
14:53
Speaker 1: show real strength across the board. Just last month, home
14:57
Speaker 1: sales jump erect UH. So obviously low interest, low mortgage
15:02
Speaker 1: rates are key driver. Let's see what else it's driving
15:04
Speaker 1: this market. We welcome Sherry Chris, president and CEO of
15:07
Speaker 1: Realology Expansion, brand's portfolio that includes better Homes and Gardens,
15:10
Speaker 1: Real Estate and e r A based in Madison, New Jersey. Sherry,
15:15
Speaker 1: thanks so much for joining us here. So again, the
15:18
Speaker 1: residential housing market very very strong. What are the key
15:22
Speaker 1: drivers that you think are pushing that market, Well, Paul's
15:27
Speaker 1: it's interesting because, first of all, there's a pent up
15:30
Speaker 1: demand from April and May due to COVID, and people
15:35
Speaker 1: that would normally be moving couldn't move during that time
15:38
Speaker 1: or couldn't look during that time, so that two months
15:41
Speaker 1: of inactivity has has caused a demand. But there are
15:45
Speaker 1: other things as well. There's a lot of migration patterns
15:49
Speaker 1: that are happening across the country where people are consumers
15:53
Speaker 1: are exiting large cities for outlying areas, um consumers want
15:58
Speaker 1: to buy a different type of home, things like that.
16:02
Speaker 1: So it's not really driven by people having to move,
16:06
Speaker 1: which is typical of the past. It's more people want
16:10
Speaker 1: to move now. So I am absolutely fascinated by this data.
16:14
Speaker 1: The chows that suburban areas are seeing, you know, anything
16:18
Speaker 1: that comes to markets snapped up. Do people really have
16:21
Speaker 1: that much savings set aside, you know too, to put
16:25
Speaker 1: together a mortgage? Are they getting what they thought they
16:28
Speaker 1: would get for their houses or their condos or their apartments.
16:32
Speaker 1: In the city's sherry Well, Bonnie, some people are buying
16:37
Speaker 1: without selling their existing home. They're renting out their property.
16:42
Speaker 1: And when we think about the mortgage rates being at
16:45
Speaker 1: such a low, historical low, and the fact that you know,
16:49
Speaker 1: with the average sale price hovering around three hundred thousand, now,
16:53
Speaker 1: it doesn't take much for people to you know, put
16:57
Speaker 1: that down or less and by a home. So we're
17:01
Speaker 1: not talking millions of dollars. And uh, you know, I
17:06
Speaker 1: don't know this for a fact, and you may know better,
17:09
Speaker 1: but I think at the beginning of COVID, people started
17:13
Speaker 1: liquidating certain assets. Cash was something that they wanted to have,
17:17
Speaker 1: and now they're looking for a home and the housing
17:20
Speaker 1: market has, you know, it's really exploded over the last
17:23
Speaker 1: couple of months. So is this how much of this
17:28
Speaker 1: is being driven? Do you think by the exodus from
17:31
Speaker 1: maybe more densely populated areas like like Manhattan for example, Um,
17:36
Speaker 1: and people really do just looking to get out of
17:39
Speaker 1: a city type environment gets a more suburban area. Part
17:44
Speaker 1: of it is, but not not all of it. I mean,
17:46
Speaker 1: if we think about the two cities that are h
17:49
Speaker 1: you know, having that problem right now. Manhattan obviously one
17:52
Speaker 1: in San Francisco is another one where there are a
17:55
Speaker 1: lot of very popular outlying areas that people could move too.
18:00
Speaker 1: And now that many of the large companies, including ours,
18:05
Speaker 1: you know, we're not opening our headquarters anytime soon. But
18:08
Speaker 1: if you look at the West Coast with Facebook, Google, Twitter,
18:13
Speaker 1: et cetera, and all of those employees are working from home,
18:17
Speaker 1: they don't need to live in the Bay Area anymore.
18:19
Speaker 1: And the same is true with Manhattan, yeah, exactly. And Sherry,
18:24
Speaker 1: the fact that housing starts throughout twenty two points per
18:26
Speaker 1: month over a month, and obviously they were up seventeen
18:29
Speaker 1: and a half percent the month previously. I know that's
18:31
Speaker 1: partially because everything got shut down so much back in
18:34
Speaker 1: March or April. But where are these starts? Are builders
18:39
Speaker 1: now sort of changing their ideas on what to build,
18:42
Speaker 1: where to build and what's the bare minimum necessary? Like
18:45
Speaker 1: are people demanding, for example, at least a bit of
18:47
Speaker 1: a garden. Well, people are demanding and through better homes
18:52
Speaker 1: and gardens. The magazine, which were affiliated with we did
18:56
Speaker 1: a number of consumer surveys during COVID and one of
19:00
Speaker 1: the things that came out loud and clear that people
19:02
Speaker 1: are looking for properties that have, you know, the possibility
19:06
Speaker 1: even extended outdoor space, UM, a front porch, a different
19:10
Speaker 1: type of living area, places where their children can study,
19:15
Speaker 1: where you know, both spouses can work in offices, and
19:18
Speaker 1: so the configuration is different. But when you think about
19:21
Speaker 1: the builders, I think the builders are taking more of
19:24
Speaker 1: a calculated risk right now because they're seeing, you know,
19:27
Speaker 1: what definitely is a pent up demand in the housing industry,
19:31
Speaker 1: and they are they're moving forward. We only have a
19:34
Speaker 1: four month supply of listings, so that's causing a backlog
19:39
Speaker 1: right now where people who would like to move and
19:42
Speaker 1: buy a new home are hesitant to put their existing
19:44
Speaker 1: home in the market because there's nothing to buy. Sherry,
19:49
Speaker 1: just an indulgence for me, given that you're affiliated with
19:52
Speaker 1: that magazine that Homes and Gardens real estate. Obviously, what
19:56
Speaker 1: is the one thing that people are most buying? Is
19:58
Speaker 1: it flowers? Is a part your furniture? And if it is,
20:01
Speaker 1: what kind of party of furniture. Oh, that's a great question, Bonnie. Um.
20:06
Speaker 1: What people want to do is extend their living area
20:10
Speaker 1: into an outdoor space. So it's patio furniture to dine outside. Um,
20:16
Speaker 1: it's outdoor kitchens are very popular, and so if you
20:19
Speaker 1: think about moving your kitchen and dining room outdoors, UM,
20:23
Speaker 1: it just extends your space. Particularly as we're continuing to
20:28
Speaker 1: somewhat isolate at home, you want to enjoy where you're living.
20:33
Speaker 1: And one of the things that we found anecdotally, UM,
20:36
Speaker 1: in talking to you know, our many brokers and agency
20:39
Speaker 1: and consumers across the country is that when people were
20:43
Speaker 1: inside for an extended period of time, you know, you
20:46
Speaker 1: start looking at the faults of your home and that
20:49
Speaker 1: causes you to want to either make changes or get outside. Sherry,
20:53
Speaker 1: thank you so much for joining us today. Sherry Chris
20:55
Speaker 1: as president and CEO of Real g Expansion brand's portfolio,
20:58
Speaker 1: which includes Better Homes and Gardens real estate. Josh joins
21:03
Speaker 1: us the senior portfolio manager at Aberdeen Standard Investments. And Josh,
21:09
Speaker 1: we've been talking about the market and how we're at,
21:11
Speaker 1: you know, all time highs, which really boggles the mind,
21:14
Speaker 1: giving that people are just suffering out there except for
21:17
Speaker 1: you know, the top of the top one per cent.
21:19
Speaker 1: What do you make of it? Why is the market
21:22
Speaker 1: fundamentally making highs? I think the real reason for that
21:27
Speaker 1: is because there's no other place really to invest when
21:29
Speaker 1: you look at interest rates and how low they are,
21:31
Speaker 1: nteniare you get left in one percent for investment there?
21:35
Speaker 1: So I think people are viewing this as the only
21:37
Speaker 1: alternatives right now. In addition, we've just seem massive stimulus
21:42
Speaker 1: by government on the US and in Europe and then
21:45
Speaker 1: said in ECB s so much money at this problem.
21:49
Speaker 1: So um, there's so much liquidity in the system and
21:52
Speaker 1: it's I believe it's been driving up the stock market.
21:55
Speaker 1: So Josh, talk to us about the infrastructure space. Here
21:59
Speaker 1: are give us the sense of what the pandemic has
22:02
Speaker 1: meant to infrastructure investing, and people just kind of pulled
22:05
Speaker 1: back the reins, pulled back the money to see what
22:07
Speaker 1: happens or is it still moving forward? So it depends
22:10
Speaker 1: on which subsector with an infrastructure and certainly governments and
22:15
Speaker 1: local governments of space and budget deficits and issues. But
22:19
Speaker 1: we actually believe there's a lot of opportunities within the
22:22
Speaker 1: infrastructure space, both on the public and private side, and
22:25
Speaker 1: part of that is from stimulus packages um for because
22:30
Speaker 1: of COVID. In addition to the fact that you just
22:33
Speaker 1: see certain sectors a prime for growth. And I'll give
22:36
Speaker 1: you one example, to start on the communications sector, right,
22:39
Speaker 1: we all know because of the pandemic, how important it
22:42
Speaker 1: is to have that broadband connection to it um because
22:46
Speaker 1: people are working from home, kids are in zoom school
22:48
Speaker 1: from home, and that's just spotlights how important it is.
22:51
Speaker 1: It's basically the come as essentially utility to that. So
22:55
Speaker 1: we were excited about the communication sector prior to because
22:58
Speaker 1: of the transition to five G, and now COVID has
23:01
Speaker 1: just put a stoplight on it. You know, you think
23:03
Speaker 1: about what's happened over the past twenty years, how we've
23:06
Speaker 1: all transitions from landlines to cell phones to smartphones and
23:09
Speaker 1: the next wave of technology it's five G and we
23:12
Speaker 1: believe that invested in cellular tavere or so those are
23:16
Speaker 1: those large steel structures that least based on the steel,
23:19
Speaker 1: powers and essential component infrastructure component that will allow the
23:24
Speaker 1: five G to actually happen and grow. Huh. So that's
23:27
Speaker 1: one area. And then there's also of course, you know
23:30
Speaker 1: energy and green energy. Well, how much time do you
23:33
Speaker 1: spend wondering what will happen if President Trump wins for
23:37
Speaker 1: a second term, given particularly that we saw yesterday for example,
23:41
Speaker 1: that he's going to allow Arctic drilling going go ahead.
23:45
Speaker 1: So he's been president for about three and a half
23:47
Speaker 1: years now and we still see a tremendous growth in
23:50
Speaker 1: the renewable sector. And that's not only happening in the US,
23:54
Speaker 1: is happening throughout the globe. You know, the EU passed
23:57
Speaker 1: the largest stimulus package into Martiall Plan with the focus
24:02
Speaker 1: on climate change. So there are great opportunities to invest
24:06
Speaker 1: in renewables and that's going to continue to happen because
24:09
Speaker 1: not only it's good for the environment, but it now
24:11
Speaker 1: also makes economics sense as the cost of solar and
24:14
Speaker 1: wind on part with carbon emitting alternatives and some geography,
24:19
Speaker 1: So we believe it's gonna The next catalyst for renewable
24:23
Speaker 1: energy is storage, and storage costs have come down about
24:27
Speaker 1: over the last decade. It's expected to come down over
24:31
Speaker 1: the next five years. But if you think about how
24:33
Speaker 1: important that is if you have a solar farm and
24:35
Speaker 1: the sun is shining during the day and now you
24:37
Speaker 1: could store that energy and use it at night and
24:40
Speaker 1: make that infrastructure as that even more valuable. So we believe,
24:43
Speaker 1: regardless of who wins the election, renewables are a great
24:46
Speaker 1: place to invest over the next ten years or so.
24:50
Speaker 1: How about if President Trump is successful in opening up
24:52
Speaker 1: the Arctic, would you be investing in some of those
24:54
Speaker 1: projects up there? Um, we probably would not be invested generally,
25:00
Speaker 1: don't for an infrastructure investment. We're not looking to take
25:03
Speaker 1: specultive views on commodity prices or the e MP side
25:08
Speaker 1: of it, So we're really looking for the more stable,
25:11
Speaker 1: predictable cash flows in our infrastructure investments. Do you look
25:15
Speaker 1: outside the US as well, Josh? I mean Europe is
25:18
Speaker 1: pretty much ahead of us in many ways, particularly when
25:22
Speaker 1: it comes to broadband and five G and towers and
25:24
Speaker 1: so on. Well, so it's interesting. I wouldn't. Um, we
25:28
Speaker 1: do invest globally, and Europe's important part of it. In
25:31
Speaker 1: some ways, we're actually ahead of them. So if you
25:33
Speaker 1: think about the tower sector in the United States, of
25:38
Speaker 1: the towers are owned by independent tower companies. In Europe
25:41
Speaker 1: it's only about twenty, so there are great opportunities. We
25:45
Speaker 1: like a company called seal Next, which is consolidated that
25:48
Speaker 1: right now, so you'll get there or get natural organic
25:51
Speaker 1: growth as data is growing thirty UM, as we're all
25:54
Speaker 1: using more than with intensive applications on the phones. Plus
25:58
Speaker 1: you'll get the inorganic growth as a cell phone companies
26:01
Speaker 1: are going to sell off their tower assets, as we've
26:04
Speaker 1: seen here in the United States, and that's beginning to
26:06
Speaker 1: happen in Europe. So here in the States it seems
26:10
Speaker 1: like infrastructure spending is fairly bipartisan. What do you expect
26:16
Speaker 1: to see out of Washington, no matter who's which administration
26:19
Speaker 1: is in the White House over the next couple of years.
26:22
Speaker 1: As you know, we try to get this economy on
26:24
Speaker 1: the other side of this pandemic, try to get this
26:26
Speaker 1: economy development growing again. And I think that's an important
26:31
Speaker 1: point you make. I believe that's the only issue that
26:33
Speaker 1: both the Democrats and Republicans agree on that we need
26:36
Speaker 1: to spend more on infrastructure. So I think regardless of
26:40
Speaker 1: who wins, we could see infrastructure spending. But what I
26:44
Speaker 1: will say is when we look to invest at Aberdeen specifically,
26:47
Speaker 1: we're looking for currently right now, with the opportunities and
26:50
Speaker 1: once and if there is an excellent infrastructure stimulus package,
26:54
Speaker 1: to me, that's a free call option for our investments.
26:58
Speaker 1: So we believe in that when and if that will happen,
27:02
Speaker 1: it will just enhance the value of investments will currently
27:05
Speaker 1: make it. So Josh never did get the infrastructure week,
27:08
Speaker 1: So what makes you so convinced that there will be
27:10
Speaker 1: something like that next time around, no matter who the
27:13
Speaker 1: president is, and that there will be money left Because
27:16
Speaker 1: the Treasury is issuing so much right now just to
27:18
Speaker 1: keep the economy from going too far underwater, why would
27:24
Speaker 1: they issue more money for an infrastructure sort of spend.
27:28
Speaker 1: Totally agree, and that's a great point, and that's why
27:30
Speaker 1: I said initially, any investment we make is based on
27:33
Speaker 1: the environment we see right now, and if something does
27:36
Speaker 1: happen to free call options. But the point you make
27:39
Speaker 1: is that the governments don't have enough money, the local
27:42
Speaker 1: and federal government to spend on infrastructure, so we believe
27:45
Speaker 1: they will use more private capital to invest on infrastructure.
27:49
Speaker 1: We saw that in Europe during the last financial crisis,
27:52
Speaker 1: and we believe that could happen in the United States.
27:54
Speaker 1: And we have seen some more privatezations PPP public private
27:58
Speaker 1: partnership and actually to increase about ten x over the
28:01
Speaker 1: last decade. So we think there's a great opportunity if
28:04
Speaker 1: you're investing in both public and private infrastructure. Josh Deats,
28:09
Speaker 1: thanks so much for joining us. We certainly appreciated Josh
28:12
Speaker 1: Deet's Senior portfolio manager Aberdeen Asset Management. They have six
28:16
Speaker 1: hundred forty five billion dollars in assets under management. Vannie,
28:21
Speaker 1: you may not know this, but the real infrastructure play,
28:23
Speaker 1: the only one I'm focused on, is this gateway project
28:26
Speaker 1: that kind of upgrade the Northeast Transit UH railroad so
28:30
Speaker 1: we can get more trains in and out of the city.
28:32
Speaker 1: That was a crucial thing before the pandemic, but maybe
28:35
Speaker 1: not so much after it. Fair boys working from home,
28:39
Speaker 1: Thanks for listening to Bloomberg Markets podcast. You can subscribe
28:42
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
28:46
Speaker 1: platform you prefer. I'm Bonnie Quinn. I'm on Twitter at
28:49
Speaker 1: Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at
28:51
Speaker 1: pt Sweeney. Before the podcast, you can always catch us
28:54
Speaker 1: worldwide at Bloomberg Radio m