Latest / Bloomberg Intelligence / Why Carson Block's Short on Bank of Ozarks Has Failed

Transcript

Why Carson Block's Short on Bank of Ozarks Has Failed · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
• 0:11
  Speaker 1: bring you the most important, noteworthy, and useful interviews for
• 0:15
  Speaker 1: you and your money, whether you're at the grocery store
• 0:17
  Speaker 1: or the trading floor. Find the Bloomberg p m L
• 0:20
  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. You know, Lisa,
• 0:32
  Speaker 1: one of the things I like to do when we
• 0:33
  Speaker 1: talk about interest rates, for example, is always think of context, right,
• 0:37
  Speaker 1: because we're worried about whether the federal rates interest rates
• 0:39
  Speaker 1: a quarter? You know, how many interest rate increases will
• 0:42
  Speaker 1: we get this year? Do you know the back in
• 0:45
  Speaker 1: seventy nine, um FED funds rate was eleven percent and
• 0:50
  Speaker 1: it wasn't even done then because in nineteen one, I remember,
• 0:54
  Speaker 1: I think it was in that summer, the June that summer,
• 0:57
  Speaker 1: they were twenty percent believed. Do you think that would
• 1:01
  Speaker 1: be a good time to buy a bank, Well, I
• 1:04
  Speaker 1: think that it was. For George Gleeson, he's our next guest.
• 1:07
  Speaker 1: She's a chief executive officer and chairman of the Bank
• 1:09
  Speaker 1: of the Ozarks based in Little Rocks. We did that,
• 1:14
  Speaker 1: thanks for us, You know it seems like a very
• 1:18
  Speaker 1: different era from back then. Well, that's what I want
• 1:20
  Speaker 1: to Maybe we could just start off. I'd like maybe
• 1:23
  Speaker 1: just for you to tell a little bit of the
• 1:25
  Speaker 1: story of the bank. And as I said, nineteen seventy
• 1:28
  Speaker 1: nine eleven percent FED funds and we're worried about quarter
• 1:33
  Speaker 1: in crease. Well, that's true, and of course Paul Volker
• 1:36
  Speaker 1: was at the FED and was pursuing the quest to
• 1:40
  Speaker 1: slay inflation by all possible means. So within my first
• 1:45
  Speaker 1: two years as chairman, CEO and majority owner of Bank
• 1:49
  Speaker 1: of the Ozarks, the FED funds, right, did go from
• 1:51
  Speaker 1: ten to twenty percent. And the interesting thing about that
• 1:56
  Speaker 1: was that we were in a state that had a
• 2:00
  Speaker 1: institutional usery law then that limited our interest rate we
• 2:03
  Speaker 1: could charge on loans to ten percent. Needless to say,
• 2:07
  Speaker 1: we were doing a lot of investments and not much
• 2:09
  Speaker 1: lending in those days and still managed to have record
• 2:12
  Speaker 1: profits that year, both those years actually well, and partly
• 2:16
  Speaker 1: probably because of net interest margin, right, I mean, you
• 2:18
  Speaker 1: could just generate so much from your loans from just
• 2:21
  Speaker 1: client activity, and I have to wonder how that contrasts
• 2:23
  Speaker 1: with today when we're facing pretty low rates for the
• 2:28
  Speaker 1: foreseeable future regardless of h to minimus interest rate tikes. Uh,
• 2:33
  Speaker 1: you know how optimistic are you? Well, we're very optimistic
• 2:38
  Speaker 1: about our situation. Of course, our net interest margin is
• 2:42
  Speaker 1: close to five percent. The quarter just ended, our net
• 2:44
  Speaker 1: interest margin was four point nine So we've very carefully
• 2:50
  Speaker 1: built all of our lines of business over the thirty
• 2:53
  Speaker 1: eight years that I've been chairman, chief executive officer to
• 2:57
  Speaker 1: to generate really good return better than average returns, while
• 3:02
  Speaker 1: we have much better than average industry credit quality. Well,
• 3:06
  Speaker 1: I have to wonder how you're doing. And I do
• 3:08
  Speaker 1: know that there was some controversy over your bank at
• 3:13
  Speaker 1: this own conference when Carson Flock of Muddy Waters UH
• 3:17
  Speaker 1: labeled your firm is the big short, They're big short,
• 3:20
  Speaker 1: they're big idea, which failed spectacularly, I should say, with
• 3:24
  Speaker 1: your firm gaining about thirty the shares in the following year.
• 3:28
  Speaker 1: So people who followed that advice would have been badly
• 3:31
  Speaker 1: burned if they had tried to go against the momentum
• 3:34
  Speaker 1: in your shares. But but part of the rational was that, Uh,
• 3:38
  Speaker 1: you were investing a lot in bigger cities and real estate,
• 3:41
  Speaker 1: and that this could potentially be a problem. Are you
• 3:44
  Speaker 1: still investing in that and what's your rational? Well, absolutely,
• 3:47
  Speaker 1: we're commercial real estate lender first and foremost, and we've
• 3:51
  Speaker 1: done that all of my career, and our clients include
• 3:56
  Speaker 1: probably eighty five of the hundred largest real estate develop
• 4:00
  Speaker 1: oppers in the country. Uh. We do very high quality
• 4:05
  Speaker 1: projects with very sophisticated, high quality sponsors, but we do
• 4:09
  Speaker 1: those transactions at very low leverage. The Real Estate Specialties
• 4:13
  Speaker 1: Group which handles all of our large national commercial real
• 4:17
  Speaker 1: estate leaning and accounts for about sixty eight percent of
• 4:20
  Speaker 1: our non purchase loans loans other than those loans we've
• 4:24
  Speaker 1: acquired in acquisitions, the weighted average loan to cost if
• 4:30
  Speaker 1: we fully advance every one of those loans is forty
• 4:32
  Speaker 1: nine percent, and the weighted average loan to appraise value
• 4:36
  Speaker 1: is forty two percent. Obviously, a commercial real estate loan
• 4:40
  Speaker 1: that you're at forty two percent loan to value and
• 4:43
  Speaker 1: forty nine percent loan to cost has an incredibly different
• 4:46
  Speaker 1: risk profile than a commercial real estate loan at eighty
• 4:50
  Speaker 1: or eighty five percent loan to value and loan to cost.
• 4:52
  Speaker 1: So we're very conservative. Um, and I think uh, when
• 4:58
  Speaker 1: UM that the sis was introduced at the SOUND conference
• 5:02
  Speaker 1: early in two six the guys had probably screened us
• 5:07
  Speaker 1: and knew, wow, look at their commercial real estate concentration,
• 5:10
  Speaker 1: look at their growth rates, they must be doing something
• 5:14
  Speaker 1: very risky. But in fact, we've probably got the most
• 5:17
  Speaker 1: conservative commercial real estate loan portfolio in the US banking industry.
• 5:22
  Speaker 1: The way that you described how Carson Block may or
• 5:27
  Speaker 1: may not have arrived at what this conclusion the very
• 5:31
  Speaker 1: nature that's screening and the very nature of how markets
• 5:35
  Speaker 1: have evolved. I'm wondering if you could just offer, as
• 5:39
  Speaker 1: I think, you're the fourth largest shareholder in the bank. Uh,
• 5:44
  Speaker 1: the bank makes no bones about your participation in its
• 5:47
  Speaker 1: founding and running. I mean that's so there's a level
• 5:51
  Speaker 1: of personal responsibility. And I'm wondering how that maybe even
• 5:55
  Speaker 1: ties in with the map of where you locate. Well,
• 5:58
  Speaker 1: there there is a great of personal responsibility. And and um,
• 6:03
  Speaker 1: I see all of the loans in the company above
• 6:06
  Speaker 1: ten million dollars. Of course, Dan Thomas, who runs our
• 6:10
  Speaker 1: real estate specialties group for US, sees all of those loans,
• 6:14
  Speaker 1: and all those loans are approved by committee. Um. But
• 6:19
  Speaker 1: the culture that we've built over thirty eight years is
• 6:23
  Speaker 1: far more important than individuals. We have created a culture
• 6:29
  Speaker 1: um that is very conservative, very customer centric, and very
• 6:34
  Speaker 1: focused on excellence in all we do. Uh for example,
• 6:39
  Speaker 1: on asset quality. In the twenty years we just celebrated
• 6:43
  Speaker 1: today at at NASDAC ringing the bell, they're celebrated our
• 6:47
  Speaker 1: twentieth anniversary as a public company. And in that twenty years,
• 6:51
  Speaker 1: there's not been a single year where our net charge
• 6:55
  Speaker 1: offer ratio has equalled or exceeded the industry's average net
• 6:59
  Speaker 1: charge offeration. We beat the industry every single year for
• 7:02
  Speaker 1: twenty years and beat them on average by sixty So
• 7:06
  Speaker 1: we're very conservative and and to do that, it's not
• 7:09
  Speaker 1: one person or a loan committee or two or three people.
• 7:12
  Speaker 1: It is a culture that invades and and pervades the
• 7:17
  Speaker 1: entire company. So given the fact that you do have
• 7:20
  Speaker 1: very high standards, you're expecting to increase your assets from
• 7:24
  Speaker 1: about twenty billion dollars to fifty billion dollars of us
• 7:27
  Speaker 1: it's probably over the next three years, well, I would
• 7:31
  Speaker 1: I would say that's an overstatement. And of course we've
• 7:35
  Speaker 1: made fifteen acquisitions in the last eight years, so the
• 7:39
  Speaker 1: pace of acquisitions one can never predict. You don't know
• 7:42
  Speaker 1: whether you're going to do an acquisition or not, because
• 7:44
  Speaker 1: you have to find a transaction that makes sense and
• 7:47
  Speaker 1: reach agreement between a willing buyer and a willing seller.
• 7:51
  Speaker 1: So if you exclude acquisitions, I would say it's more
• 7:54
  Speaker 1: realistic to assume that we would grow from twenty bill
• 7:57
  Speaker 1: and to fifty b and over a five, six or
• 8:00
  Speaker 1: seven year time frame apart from acquisitions. All right, So
• 8:03
  Speaker 1: I imagine it's it's an interesting time right now, and
• 8:05
  Speaker 1: I wish we could speak for the next hour because frankly,
• 8:09
  Speaker 1: I have so many questions about running a bank in
• 8:11
  Speaker 1: this current environment. And we didn't even get into the
• 8:13
  Speaker 1: regulatory rollbacks and what that might do. I mean, there's
• 8:16
  Speaker 1: so much. Unfortunately we have to leave it there, but
• 8:19
  Speaker 1: I promise back he'll give you the phone number, please do.
• 8:22
  Speaker 1: George Gleeson, thank you so much for joining us. Truly
• 8:25
  Speaker 1: fascinating uh story and a fascinating bank. Really, Chief executive
• 8:29
  Speaker 1: Officer and Chairman of the Bank of the Ozarks in
• 8:32
  Speaker 1: Little Rock, Arkansas. Since that zone meeting, the shares gained
• 8:36
  Speaker 1: more than thirty percent in the following year. Well, there
• 8:51
  Speaker 1: is a new sub prime boom, and here to tell
• 8:54
  Speaker 1: us about it is Gabrielle Coppola and Gabrielle, you know
• 8:59
  Speaker 1: you are I always I didn't think of you necessarily
• 9:01
  Speaker 1: just as someone who's interested in the credit but also
• 9:03
  Speaker 1: in the underlying manufacture of vehicles autumn, you know, around
• 9:07
  Speaker 1: the world. Can you just describe what you're trying to
• 9:10
  Speaker 1: get at here in terms of the US and the
• 9:12
  Speaker 1: way we buy cars and what's happened, because a lot
• 9:15
  Speaker 1: of this has to do with the way people finance
• 9:19
  Speaker 1: their automobiles. Yeah, um, I think that. You know, after
• 9:22
  Speaker 1: the mortgage crisis, Um, the housing sector wasn't a very
• 9:26
  Speaker 1: healthy place for banks to play. But then there was
• 9:29
  Speaker 1: also the rebound, the revival of the auto industry, helped
• 9:32
  Speaker 1: in course by the you know, bailout by the US government.
• 9:35
  Speaker 1: Car sales came booming back, and um, people needed banks
• 9:39
  Speaker 1: to finance that, and that created a huge opportunity. There
• 9:42
  Speaker 1: was a huge credit expansion, and we saw a huge
• 9:45
  Speaker 1: credit expansion for people with lower credit scores buying cars. Right.
• 9:50
  Speaker 1: And we've heard a lot about has some of the
• 9:52
  Speaker 1: subprime auto loans that have been originated since the crisis
• 9:55
  Speaker 1: have been souring at a faster pace than many have expected.
• 9:59
  Speaker 1: That it's kind have created this spiraling effect where you
• 10:02
  Speaker 1: had a lot of not only subprime auto loans, but
• 10:05
  Speaker 1: you also had a lot of auto leases. So then
• 10:07
  Speaker 1: the resale values are going down as the leases come up,
• 10:10
  Speaker 1: and you know, there's been a big issue here. But
• 10:12
  Speaker 1: I really want to home in on two companies in
• 10:14
  Speaker 1: particular Santander, which is the leading subprime auto loan originator,
• 10:19
  Speaker 1: as well as Fiat Chrysler, which is thought of as
• 10:21
  Speaker 1: sort of the third in the triumvirate of vehicle manufacturers
• 10:26
  Speaker 1: in the US, And how do they come to kind
• 10:29
  Speaker 1: of join forces and how it significantly it has their
• 10:33
  Speaker 1: partnership kind of created a lot of the subprime auto
• 10:35
  Speaker 1: loans that weren't looking at right now. Well again, when
• 10:39
  Speaker 1: Chrysler was sort of coming back from the dead, you know,
• 10:41
  Speaker 1: in the wake of the financial crisis, they needed they
• 10:43
  Speaker 1: didn't have a captive finance arm anymore, and they needed one,
• 10:47
  Speaker 1: just like you have Foreign Motor Credit or GM financial.
• 10:49
  Speaker 1: Chrysler needed a partner to finance its car sales instead
• 10:53
  Speaker 1: of I think they didn't have the money to buy one,
• 10:55
  Speaker 1: so they made this partnership with Sintender, And I think
• 10:57
  Speaker 1: one of the reasons the head of sales for cry
• 11:00
  Speaker 1: sort of at the time said he chose Santanair because
• 11:02
  Speaker 1: their expertise in automated decision NG and big data. So
• 11:06
  Speaker 1: the idea that they could really um use big data
• 11:08
  Speaker 1: to kind of harness get it on this boom um
• 11:11
  Speaker 1: speed up the process of buying cars, like big data
• 11:13
  Speaker 1: meaning that they could they could use less information from
• 11:17
  Speaker 1: each borrower to more quickly originate loans, or big data
• 11:20
  Speaker 1: to basically identify the credit quality. I think that more
• 11:23
  Speaker 1: that's the idea that analytics data mining being able to
• 11:26
  Speaker 1: kind of assess people's credit quality in a more efficient way.
• 11:31
  Speaker 1: And by the reason why Ascess in particular is because
• 11:33
  Speaker 1: Santandair in particular has been pinpointed is not verifying the
• 11:37
  Speaker 1: incomes of a lot of the uh people who uh
• 11:41
  Speaker 1: it lends to right, yes, And that is actually in
• 11:43
  Speaker 1: my story I talked about this settlement they had with
• 11:45
  Speaker 1: attorneys general in Massachusetts and and and Delaware where they
• 11:49
  Speaker 1: paid twenty six million dollars. They you know, they didn't
• 11:52
  Speaker 1: neither admit nor deny any wrongdoing, but if you read
• 11:54
  Speaker 1: that settlement, it talks about what they're basically, what they're
• 11:56
  Speaker 1: accused of by the prosecutors is kind of looking the
• 11:58
  Speaker 1: other way when there's very obvious signs of fraud, you know,
• 12:02
  Speaker 1: when when you get there's They had a group they
• 12:04
  Speaker 1: called them the fraud dealers, their internal audit system. There
• 12:07
  Speaker 1: were dealers who were um sending applications where someone would
• 12:10
  Speaker 1: um default you know on the very first payment or
• 12:13
  Speaker 1: you find out that the car they said the certain
• 12:15
  Speaker 1: trim levels were a certain level that made the collateral
• 12:18
  Speaker 1: bigger so that they could justify getting a bigger loan
• 12:20
  Speaker 1: and put that person in that car. And turned out
• 12:22
  Speaker 1: that those were not true. So that's happening at the
• 12:25
  Speaker 1: at the real originator is the car dealer who's getting
• 12:28
  Speaker 1: you in that car, right, But they're saying, Santander, you
• 12:30
  Speaker 1: did not do your job in terms of having your
• 12:33
  Speaker 1: due diligence to check that and that issue came up again.
• 12:35
  Speaker 1: This is separate, but when you know, Moody's did a
• 12:37
  Speaker 1: report early this year looking at the A B S
• 12:40
  Speaker 1: that Santender originates. They said they only chat securities and
• 12:45
  Speaker 1: thank you. Um they said, oh we did. We had
• 12:48
  Speaker 1: this new data that came out under some new rule,
• 12:50
  Speaker 1: you know, they were able to see more data and said, uh,
• 12:52
  Speaker 1: Santenda only checks eight percent of the incomes in this
• 12:55
  Speaker 1: subprime this's a billion dollars of of subprime auto auto loans.
• 13:00
  Speaker 1: Santandera will say that they have other criteria that they're
• 13:02
  Speaker 1: using to check and it's not just that that's basically
• 13:04
  Speaker 1: one of the things that they say. But that's the issue,
• 13:07
  Speaker 1: and I think that's what people are uh scrutinizing. What's
• 13:10
  Speaker 1: regulators are looking at eight percent and that compares with ally,
• 13:14
  Speaker 1: which is another big old GM. Yes, now they're quite
• 13:19
  Speaker 1: separate from GM, but they said, hey, you know, by
• 13:22
  Speaker 1: the way, we check sixty five percent of our incomes,
• 13:24
  Speaker 1: and GM Financial also said we check about sixty So
• 13:28
  Speaker 1: how many vehicles do you have any sense of how
• 13:30
  Speaker 1: many or the proportion of Chrysler vehicles sold that relied
• 13:34
  Speaker 1: on santan Dair for financing. Well, that's actually so the
• 13:38
  Speaker 1: actual it's kind of so they have this partnership and
• 13:40
  Speaker 1: it's been very hard for them to meet the pennant.
• 13:43
  Speaker 1: They wanted Santender to be doing like sixty of their
• 13:46
  Speaker 1: you know, Chrysler capital, that's the brand of it. They
• 13:49
  Speaker 1: wanted it by this time, but this year it should
• 13:51
  Speaker 1: have been sixty. It's so it's actually very low. So
• 13:54
  Speaker 1: even though Sintenda is a very low proportion of Chrysler financing,
• 13:58
  Speaker 1: christ would makes up a very more than half of
• 14:01
  Speaker 1: the auto financing that Santander does. Well. That goes back
• 14:06
  Speaker 1: to that agreement that you described earlier, saying that maybe
• 14:09
  Speaker 1: Fiat was not large enough to buy or uh, Fiat
• 14:13
  Speaker 1: Chrysler was not large enough to buy its own credit company,
• 14:16
  Speaker 1: so they had to make where they did make this
• 14:18
  Speaker 1: alliance with Santander, right, and this is supposed to be
• 14:20
  Speaker 1: and it still is. I think Santander still wants it
• 14:23
  Speaker 1: to be a big avenue for expansion. Growth is Chrysler,
• 14:26
  Speaker 1: and they're actually doing a lot of things. You know,
• 14:28
  Speaker 1: they have a program to clean up, They're trying the
• 14:31
  Speaker 1: new CEO, Scott Powell. They've actually fired eight hundred dealers
• 14:34
  Speaker 1: across their network to clean They're trying, they are doing things,
• 14:37
  Speaker 1: but this is still out there. Gabrielle Coppola, thank you
• 14:40
  Speaker 1: so much for joining us, and uh, congratulations on an
• 14:42
  Speaker 1: awesome story. It definitely takes a look at a deeper
• 14:45
  Speaker 1: look at an issue that a lot of people have
• 14:47
  Speaker 1: been homing in on as a possible problem. Gabrielle Coppola
• 14:51
  Speaker 1: is an autos writer for Bloomberg US. Well, to learn
• 15:05
  Speaker 1: more about what's going on with Blue Apron, we have
• 15:08
  Speaker 1: an expert, Selena Wang is joining us now she is
• 15:11
  Speaker 1: are Bloomberg. I gotta say, you're like the meal You
• 15:15
  Speaker 1: cover meal companies and uh delivery companies, but they're really
• 15:20
  Speaker 1: tech companies. Right, this is Blue Apron. What is going on?
• 15:23
  Speaker 1: The stock was down as much as twelve right. I
• 15:25
  Speaker 1: think you just hit on something that a lot of
• 15:27
  Speaker 1: people say. You know, just because they sell orders digitally
• 15:30
  Speaker 1: doesn't make it a tech company necessarily. This is a
• 15:32
  Speaker 1: super cost intensive business. They have to source all the ingredients,
• 15:35
  Speaker 1: they have to put it all together. These are really
• 15:37
  Speaker 1: expensive ingredients, put them to fulfillment centers, delivered to people.
• 15:41
  Speaker 1: And this Amazon trademark filing is just another kind of
• 15:46
  Speaker 1: nail on the coffin for Blue Apron, as some investors
• 15:48
  Speaker 1: would see it. I mean, Blue Apron already has all
• 15:51
  Speaker 1: of these financial issues, and now you have a behemoth
• 15:54
  Speaker 1: that may be getting into the same business that it's in. Okay,
• 15:56
  Speaker 1: so that maybe getting into the same business, right, I
• 15:59
  Speaker 1: mean they file a trademark Apple hard food kits. This
• 16:03
  Speaker 1: is Amazon dot Com? How soon? How quickly could they
• 16:07
  Speaker 1: develop an actual business based on this filing? And second
• 16:11
  Speaker 1: of all, do we have a sense of whether it
• 16:13
  Speaker 1: really does directly overlap with bluavor? I mean it does.
• 16:16
  Speaker 1: It definitely sounds like right right. So, in the world
• 16:18
  Speaker 1: of these types of applications, there's kind of two categories.
• 16:21
  Speaker 1: So there's one which is, we're already using this trademark
• 16:24
  Speaker 1: for products, so you should consider application. And the second
• 16:26
  Speaker 1: one is we're planning to use this trademark for products,
• 16:29
  Speaker 1: so you should uh is we're planning to use this
• 16:32
  Speaker 1: trademark for products, so you should consider application. Amazon filed
• 16:36
  Speaker 1: under the ladder, which means they're planning to use it,
• 16:38
  Speaker 1: doesn't necessarily mean this is all going to go through
• 16:41
  Speaker 1: that is going to get approved. So that means that
• 16:44
  Speaker 1: they're definitely looking at the business and they're considering it. Uh.
• 16:48
  Speaker 1: No idea when they would actually start doing this. Why
• 16:51
  Speaker 1: why would they get into it? It's a crowded business
• 16:53
  Speaker 1: that is of dubious lucrative nous. Well, if we look
• 16:56
  Speaker 1: at this Amazon Whole Foods deal, they were willing to
• 16:59
  Speaker 1: put in PLoP down billions of dollars to buy a
• 17:02
  Speaker 1: grocery store business. Now, uh, food is incredibly important. It's
• 17:06
  Speaker 1: a huge, huge market. Amazon clearly wants to get into it.
• 17:10
  Speaker 1: They have the brand now, they have the distribution, they
• 17:12
  Speaker 1: have the fulfillment centers with the Whole Food's acquisition. So
• 17:15
  Speaker 1: you can think of all sorts of integrations to make
• 17:18
  Speaker 1: something like meal delivery actually pretty efficient for somebody like
• 17:24
  Speaker 1: Amazon when they have so much backing and support on
• 17:27
  Speaker 1: the back end and in terms of the physical locations.
• 17:30
  Speaker 1: Have you heard anybody saying that, uh, Blue Apron is
• 17:34
  Speaker 1: now a buy at six? I mean, if you're talking
• 17:38
  Speaker 1: about it right, because nothing the deal was done right
• 17:41
  Speaker 1: June Stockho's public at ten. They sold thirty million shares
• 17:47
  Speaker 1: and stock is what trading at six and change what
• 17:53
  Speaker 1: That doesn't necessarily mean they're, you know, throwing away all
• 17:55
  Speaker 1: their strategic plans. They already had the money, They've got
• 17:58
  Speaker 1: big cash flow. Um, they have a brand name. I'm
• 18:03
  Speaker 1: just wondering, they've built infrastructure that is theirs, and I'm wondering,
• 18:08
  Speaker 1: you know, you hear anybody saying anything like, well, no,
• 18:10
  Speaker 1: they're a player. Remember what happened to Facebook. It came
• 18:13
  Speaker 1: out I think at thirty five, and was that whole
• 18:15
  Speaker 1: thing with the Nastac and you know, people were furious,
• 18:19
  Speaker 1: but the turn out that if you had held on
• 18:21
  Speaker 1: it was a good bed, right. I mean, I don't
• 18:23
  Speaker 1: think we can say for sure right now whether it's
• 18:25
  Speaker 1: going to be a total flop or if it's going
• 18:27
  Speaker 1: to succeed and get to facebooks. I mean, it's not
• 18:29
  Speaker 1: like Amazon was buying, you know, the sharpest hack in
• 18:32
  Speaker 1: the box in the sense that the Whole Foods was
• 18:34
  Speaker 1: facing competition, when I mean in a way, this was
• 18:37
  Speaker 1: great for Whole Foods to get. Asking whether Amazon would
• 18:40
  Speaker 1: consider buying Blue Apron, I don't think it would make
• 18:44
  Speaker 1: a lot of sense for them at this point. I mean,
• 18:46
  Speaker 1: they have Whole Foods, they could build their own Blue
• 18:48
  Speaker 1: Apron esque sort of business. But like as you did say,
• 18:51
  Speaker 1: it is quite cheap right now. I mean Blue Apron
• 18:53
  Speaker 1: does have the brand, that's true, they have you know,
• 18:56
  Speaker 1: people know that it's a quality product they're getting when
• 18:59
  Speaker 1: they go to Blue Brint. But this is not a
• 19:00
  Speaker 1: cheap product. And the type of customer that's going to
• 19:03
  Speaker 1: Whole Foods is a very similar demographic as a type
• 19:05
  Speaker 1: of customer that is going to Blue Apron. Kind of
• 19:07
  Speaker 1: this top ten percent of income in households, it's not cheap.
• 19:11
  Speaker 1: At what point does Amazon just have so much momentum
• 19:14
  Speaker 1: because they already have the brand name, They're already associated
• 19:17
  Speaker 1: with something that many people view as quality and reliable
• 19:20
  Speaker 1: and consistent, so they don't have to spend all this
• 19:22
  Speaker 1: money on advertising like Blue Apron has, which has been
• 19:26
  Speaker 1: the bulk of their revenue right exactly, I mean marketing
• 19:30
  Speaker 1: and fulfillment centers had has been a huge reason why
• 19:33
  Speaker 1: they've had net losses even as revenue has been growing.
• 19:37
  Speaker 1: And you're right, I mean Amazon with Amazon Prime, they
• 19:39
  Speaker 1: already have kind of like an existing customer base and
• 19:42
  Speaker 1: you can think of all sorts of ways where you know,
• 19:44
  Speaker 1: you order you know, Amazon sort of meal delivery kit
• 19:47
  Speaker 1: and shop at Whole Foods and you get extra Prime
• 19:49
  Speaker 1: points and this all kind of works together. An ecosystem
• 19:52
  Speaker 1: makes it very easy to sign up and and get
• 19:54
  Speaker 1: people to use whatever service they may come up with
• 19:57
  Speaker 1: in the future. Zappos, that was what was thinking of.
• 20:00
  Speaker 1: Zap Posts was the shoe business, and they've let it
• 20:04
  Speaker 1: have its own brand name, and everyone knows it's owned
• 20:07
  Speaker 1: by Amazon, but it's let you know, it's doing its
• 20:09
  Speaker 1: own thing. Who news I wouldn't put anything past Amazon, right, Well,
• 20:13
  Speaker 1: I'm clearly a strategic vision that is not just confined
• 20:17
  Speaker 1: to uh, you know what has happened, more like making
• 20:20
  Speaker 1: it up into the future. I have to wonder how
• 20:23
  Speaker 1: much this is related to the Whole Foods purchase. Well,
• 20:26
  Speaker 1: you know this did come around the same time, this
• 20:30
  Speaker 1: patent application, this trademark application as a Whole Foods purchase.
• 20:32
  Speaker 1: And I think that now that they have Whole Foods,
• 20:35
  Speaker 1: they have so many a whole world of opportunities in
• 20:38
  Speaker 1: the space of food um to go forth with now
• 20:40
  Speaker 1: that they have these physical locations in this brand. So
• 20:43
  Speaker 1: retailers of all types are just cowering in the corners
• 20:46
  Speaker 1: hoping that Amazon won't come after them. Selena Wayne, thank
• 20:49
  Speaker 1: you so much for joining us and for illuminating what's
• 20:51
  Speaker 1: going on today with Blue Apron shares, which have dropped
• 20:53
  Speaker 1: as much as twelve percent following this trademark application for
• 20:58
  Speaker 1: something that Amazon just consider at some point in the future.
• 21:02
  Speaker 1: Selena Wayan is a Bloomberg Tech reporter and she joins
• 21:05
  Speaker 1: us here at our Bloomberg eleven three oh studios. Well
• 21:20
  Speaker 1: here to help us define the polls about President Donald
• 21:23
  Speaker 1: Trump is and Selzer, the president of Selzer and Company
• 21:26
  Speaker 1: are based in the Mourne Right Public opinion Research firm.
• 21:30
  Speaker 1: And uh, and thank you very much for being with us. Um,
• 21:34
  Speaker 1: just according to the new poll, just of Americans approve
• 21:39
  Speaker 1: of the job that President Donald Trump is doing. Now
• 21:43
  Speaker 1: you are this is the polling number that you've been
• 21:46
  Speaker 1: able to put together and analyze. Correct, you're doing this
• 21:49
  Speaker 1: for for Bloomberg, for us, that's right? Where the proposter
• 21:52
  Speaker 1: for Bloomberg nots right? And maybe just explain how do
• 21:55
  Speaker 1: you actually go about this polling and how does it
• 21:59
  Speaker 1: vary so much between polls. Well, if what we do
• 22:03
  Speaker 1: is do a scientific survey of a randomly selected sample
• 22:07
  Speaker 1: of a thousand people across the country, uh, and make
• 22:10
  Speaker 1: sure that that's a good cross section of residents of
• 22:13
  Speaker 1: the United States. And we asked them a battery of questions.
• 22:16
  Speaker 1: Some of these questions we've been asking since the inception
• 22:19
  Speaker 1: of the poll in two thousand nine. And UM, that
• 22:23
  Speaker 1: gives us a way to kind of track how things
• 22:25
  Speaker 1: have changed and how things have stayed the same over time.
• 22:28
  Speaker 1: So you know, two thousand nine was the beginning of
• 22:31
  Speaker 1: the Obama administration. So we have the highs and the
• 22:33
  Speaker 1: lows of that presidency, and early in Obama's presidency his
• 22:39
  Speaker 1: numbers were in the fifty percent and mid fifty percent range.
• 22:43
  Speaker 1: So Donald Trump is beginning his presidency at a historic low.
• 22:47
  Speaker 1: And there's some other polls out right now which are
• 22:50
  Speaker 1: UM have a longer history, that are saying this is
• 22:52
  Speaker 1: the lowest for any president this early in his presidency. So,
• 22:57
  Speaker 1: and let's talk about the latest survey that you just
• 23:00
  Speaker 1: conducted on behalf of Bloomberg and what it says about
• 23:04
  Speaker 1: the state of the American consumer. There's some good news
• 23:07
  Speaker 1: and there's some bad news. Yes, there there is good news.
• 23:11
  Speaker 1: There's optimism, Uh, there's good feeling. Is people take a
• 23:15
  Speaker 1: look at job security very specifically, and people take a
• 23:19
  Speaker 1: look at the value of their home. Uh. It's the
• 23:22
  Speaker 1: highest numbers that we've seen for both of those since
• 23:25
  Speaker 1: we've been asking those questions. So that's a very personal
• 23:27
  Speaker 1: look at what's happening economically. But we all going back
• 23:31
  Speaker 1: to before the crisis or since the crisis. UM. We
• 23:35
  Speaker 1: started asking those questions in December of two thousand twelves,
• 23:40
  Speaker 1: so since the crisis exactly. UM. But and and then
• 23:44
  Speaker 1: a more general question about whether the people feel they
• 23:48
  Speaker 1: are moving closer to their hopes for their career, and
• 23:50
  Speaker 1: finances are moving farther away from their dreams. Now say
• 23:56
  Speaker 1: that they're moving closer. That's as high as we've ever
• 23:59
  Speaker 1: seen it. So you have this juxtaposition of feeling good
• 24:04
  Speaker 1: about things and what's happening with them personally, and and
• 24:08
  Speaker 1: yet awarding a low approval rating for the president. And
• 24:13
  Speaker 1: so I kind of think about Jim Carvel, who was
• 24:16
  Speaker 1: an advisor to President Clinton, who said, you know, when
• 24:20
  Speaker 1: you see a turtle on a on a sense post,
• 24:22
  Speaker 1: it didn't get there by themselves by itself. So you
• 24:25
  Speaker 1: kind of think, well, what is that that's happening in
• 24:27
  Speaker 1: the economy, and did it happen by itself? Or is
• 24:30
  Speaker 1: Donald Trump having any leadership impact. It's just there's a
• 24:34
  Speaker 1: little bit of a disconnect. There's a little bit of
• 24:36
  Speaker 1: a dissonance between the goodness that people are feeling and
• 24:40
  Speaker 1: not getting any attribution for the president who's leading this country.
• 24:44
  Speaker 1: You know, And just to play devil's advocate, what if
• 24:46
  Speaker 1: somebody said, look, polls have been radically inaccurate for the
• 24:51
  Speaker 1: past few elections, and you know, maybe this dissonance reflects
• 24:56
  Speaker 1: the way that questions are being asked to get an
• 24:59
  Speaker 1: unfavored opinion. Well, I would I would take issue with
• 25:03
  Speaker 1: the radically inaccurate. In fact, our polls have been highly accurate.
• 25:06
  Speaker 1: Were rated among the most accurate polling companies in of
• 25:10
  Speaker 1: the three hundred and fifty polling companies that have been ranked.
• 25:14
  Speaker 1: And the fact of the matter is that we we
• 25:17
  Speaker 1: see remarkable consistencies. We see things only fluctuating by a
• 25:21
  Speaker 1: little bit. So it's not as though we suddenly got
• 25:24
  Speaker 1: something very different. Um. You know, I think there is
• 25:29
  Speaker 1: no way, given that we asked these questions the same
• 25:32
  Speaker 1: way that they were asked of Barack Obama, to say
• 25:35
  Speaker 1: that it's the wording of the question that is leading
• 25:38
  Speaker 1: us to say that that, but Donald Trump's numbers are lower,
• 25:42
  Speaker 1: that there's just no evidence that would support that claim.
• 25:47
  Speaker 1: And do the poll results indicate to you a polarized
• 25:51
  Speaker 1: nation the way it is often described anecdotally, Well, what
• 25:54
  Speaker 1: the poll results do tell us is that there's a
• 25:57
  Speaker 1: there's a there's a market difference in how Trump Trump
• 26:01
  Speaker 1: voters are rating their president, which is they are sticking
• 26:05
  Speaker 1: with him. Uh, there is a very strong majority who
• 26:08
  Speaker 1: approve of the job that he's doing. Um, So that
• 26:11
  Speaker 1: overall low rating is the people who did not vote
• 26:14
  Speaker 1: for him, whether they didn't vote in that election at all,
• 26:18
  Speaker 1: or whether they voted for Hillary Clinton or for somebody else.
• 26:20
  Speaker 1: What kind of number was What was that coming up
• 26:23
  Speaker 1: as that you describe. The Trump voter number is in
• 26:26
  Speaker 1: the high eighties. So there that base that he has
• 26:31
  Speaker 1: created is still saying that what they see him doing
• 26:35
  Speaker 1: is what they hired him to do. And unrelated to Bloomberg,
• 26:39
  Speaker 1: we did some focus groups earlier this year to ask
• 26:41
  Speaker 1: exactly that question, focus groups with exclusively Trump voters who said, look,
• 26:46
  Speaker 1: we hired him so that he would create some havoc,
• 26:50
  Speaker 1: and he's creating some havoc, and we're not going to
• 26:53
  Speaker 1: like all of it, but it's that general approach that
• 26:55
  Speaker 1: they were looking for. They were looking to shake things up.
• 26:59
  Speaker 1: So while they might not agree with all of the specifics,
• 27:02
  Speaker 1: the general idea of changing the way that the nation
• 27:06
  Speaker 1: is governed they were supportive of. And Seltzer really fascinating.
• 27:11
  Speaker 1: Thank you so much for joining us and for conducting
• 27:13
  Speaker 1: the poll, which is really illuminating and a good look
• 27:15
  Speaker 1: into some of the polarization within people's own opinions about
• 27:18
  Speaker 1: what's going on right now and Seltzer, President of Seltzer
• 27:22
  Speaker 1: and Company based in De Moyne, Iowa. She's sharing the
• 27:25
  Speaker 1: results of this broad based poll on President Trump conducted
• 27:29
  Speaker 1: for Bloomberg. It was a telephone poll of more than
• 27:31
  Speaker 1: a thousand American adults. Thanks for listening to the Bloomberg
• 27:37
  Speaker 1: P and L podcast. You can subscribe and listen to
• 27:40
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 27:45
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 27:49
  Speaker 1: on Twitter at Lisa abramoids one Before the podcast, you
• 27:52
  Speaker 1: can always catch us worldwide on Bloomberg Radio.