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BlackRock CEO Larry Fink: Clients Don't Want Exposure To Crypto · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg pim L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. 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. It
• 0:33
  Speaker 1: is my pleasure now to bringing Eric Shatzker, he of
• 0:36
  Speaker 1: course of Bloomberg Television and Bloomberg Radio and Bloomberg dot Com.
• 0:40
  Speaker 1: And he had an interview with Black Rocks chief executive
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  Speaker 1: Larry Fink on the day that Black Rock reported their results,
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  Speaker 1: and I believe Larry Finks hi arch and then they said,
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  Speaker 1: um didn't. He said that he has zero interests in
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  Speaker 1: cryptocurrencies because the clientele at black Rock has not been
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  Speaker 1: pounding on the door for crypto. Clients don't want any
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  Speaker 1: exposure to crypto, which candidly, phim I found interesting on
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  Speaker 1: any number of levels, one of which is this a
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  Speaker 1: number of the crypto bulls, let's call it. You could
• 1:15
  Speaker 1: point to Mike novograts, you could point to Louis Bacon,
• 1:19
  Speaker 1: Louis Baker, Dan moorehead who runs a cryptocurrency head deal
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  Speaker 1: out in California, think that the next wave in crypto
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  Speaker 1: will be the institutional embrace of cryptocurrencies as an asset class.
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  Speaker 1: If that's going to happen, black Rock has to figure
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  Speaker 1: into the picture somewhere, because it's got six point three
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  Speaker 1: trillion dollars in assets, not one dime of which is
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  Speaker 1: currently in crypto. And furthermore, when I asked Larry, do
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  Speaker 1: they feel the need to prepare for the day when
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  Speaker 1: clients do take an interest in crypto, he said at
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  Speaker 1: the moment, no, So, Eric, can you just sort of
• 2:01
  Speaker 1: take a step back and give us the highlights of
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  Speaker 1: the interview? Well, let's start with this. Black Rock reported
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  Speaker 1: earnings today and by almost every measure, Lisa, this was
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  Speaker 1: a quote unquote strong quarter. On the surface, it looks
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  Speaker 1: great earnings per share ahead of analyst expectations, double digit
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  Speaker 1: revenue growth, which, if you think about it, for a
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  Speaker 1: firm of this size, is pretty remarkable. Margin expansion to
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  Speaker 1: a new record level assets under management in a flat
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  Speaker 1: lining equity market stable at six point three trillion dollars.
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  Speaker 1: But I just hit the nail on the head, if
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  Speaker 1: you will, flatlining equity market. You've got a yield curve
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  Speaker 1: that's flattening as well. Investors are losing interest in financial
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  Speaker 1: assets and as a result, Black Rocks inflows are the
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  Speaker 1: lowest since the second quarter of two thousand sixteen, and
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  Speaker 1: that raises a question and possibly a concern for investors.
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  Speaker 1: I asked Larry think about this. Let's hear him talk
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  Speaker 1: about flows. We saw clients worldwide pause. We saw clients
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  Speaker 1: are they're they're confused, They're confused as to you know,
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  Speaker 1: what direction the markets will go. This is what they're
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  Speaker 1: telling you. Absolutely, and I'm traveling everywhere. As you know,
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  Speaker 1: clients are questioning, UM, the whole foundations of international investing,
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  Speaker 1: and that's the foundation of globalization. As we start entering
• 3:29
  Speaker 1: this conversation about trade and tarroiffs, UM, we're seeing clients
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  Speaker 1: hold back a little bit. They're they're waiting to see
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  Speaker 1: how does this play out. The backdrop is we have
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  Speaker 1: very strong earnings. First quarter. We represented we saw very
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  Speaker 1: strong earnings throughout the SMP. We believe we're going to
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  Speaker 1: see strong earnings in the second quarter. We're going at
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  Speaker 1: a rate of eight billion dollars of stock repurchases. We
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  Speaker 1: have record amount of M and A. So the backdrop
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  Speaker 1: is we're shrinking amount of equities, we have record earnings
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  Speaker 1: that they said, and yet markets are essentially unchanged. Does
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  Speaker 1: that surprise you, Oh, absolutely if you. If you asked
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  Speaker 1: me at the beginning of the year, we're gonna have
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  Speaker 1: record amount of M and a record amount of earnings
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  Speaker 1: and record amount of stock repurchases, I would have said
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  Speaker 1: the market would be up ten to twelve percent and
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  Speaker 1: markets are essentially flat. Now if you strip out instead
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  Speaker 1: of the s would be more like yes. More importantly though,
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  Speaker 1: if you strip out the seven major tech stocks that
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  Speaker 1: have done very well. Actually the breath is really poor
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  Speaker 1: and we're just seeing evidence of that. But let's go
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  Speaker 1: deep into the flows, because the flows really don't the
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  Speaker 1: overall macro number doesn't tell you what was going on.
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  Speaker 1: We saw a lot of churn in the in our
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  Speaker 1: index equity business, and that's where we saw the outflows.
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  Speaker 1: We had about thirteen billion dollars about flows and in
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  Speaker 1: that area very low fee things, so that we saw
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  Speaker 1: we saw investors pull out of what I would say
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  Speaker 1: emerging markets in other areas. And I need to remind
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  Speaker 1: you cash for the first time since two thousand and
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  Speaker 1: eight a little before that is earning you a return.
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  Speaker 1: You're earning two plus. You could pause and earn money
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  Speaker 1: in the last number. Can afford to wait, You can
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  Speaker 1: afford the weight. And this is a huge change in
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  Speaker 1: the marketplace in the last nine years, and people have
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  Speaker 1: forgotten about that. You're earning almost two and a half
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  Speaker 1: percent now in a money market fund. You know, that's
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  Speaker 1: pretty similar to the five year treasury. You could pause,
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  Speaker 1: and by the way, equities are not up too and
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  Speaker 1: a half percent, so you can be earning money in
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  Speaker 1: cash and pausing. Let me get back to the fund. Second,
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  Speaker 1: should people be pausing? Does that seem like, I act
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  Speaker 1: wise smart thing to do right now? It depends if
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  Speaker 1: you're if you're horizons the next five years, it's probably
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  Speaker 1: good to pause. If you're focusing on your retirement and
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  Speaker 1: your pench front, you should never pause. You should be
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  Speaker 1: continuing to invest. It really depends on the time horizon.
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  Speaker 1: UM we saw four billion dollars between UH flows and
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  Speaker 1: commitments and UM in alternatives and in our liquid alts.
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  Speaker 1: We had eight billion dollars and flows in our in
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  Speaker 1: our multi assets. So if you break out all the flows,
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  Speaker 1: positive flows and moneys going in some places money coming out,
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  Speaker 1: but we've seen huge churn. And if you strip out
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  Speaker 1: the index business, which is virtually low low low low fees,
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  Speaker 1: are flows were better than what the headline is because
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  Speaker 1: we had, as I said, thirteen billion dollars institutional outflows.
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  Speaker 1: And I shared as a very good example of where
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  Speaker 1: you saw a real e business. Yes, in the E
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  Speaker 1: t F business. Uh Pen, Lisa, you can hear Larry.
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  Speaker 1: They're talking as as he said in his words about
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  Speaker 1: the concerns that investors have, their confused. They don't know
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  Speaker 1: what to make of the trade tensions, they don't want
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  Speaker 1: to make about the pullback from globalization. But just to
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  Speaker 1: put an exclamation mark on this, if we look forward,
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  Speaker 1: Larry Fink says, if the United States lives up to
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  Speaker 1: its threat and imposes tariffs on an additional two billion
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  Speaker 1: dollars of Chinese imports, we will have, in his words,
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  Speaker 1: a full blown trade war. And if that becomes the
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  Speaker 1: case by the end of August, he anticipates the ten
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  Speaker 1: pullback in stocks from current levels and a slowdown, if
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  Speaker 1: not ah, something close to a pause in economic growth
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  Speaker 1: come two thousand. So Eric I also want to give
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  Speaker 1: an exclamation point something else that he said, which is
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  Speaker 1: that you can afford to pause and you can actually
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  Speaker 1: earn something. In other words, you can put your money
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  Speaker 1: in cash and actually get something in return before investing
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  Speaker 1: in riskier assets. And I thought that it was really compelling.
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  Speaker 1: You You pressed him on that rightly so, and you
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  Speaker 1: know he gave us sort of you know, double sided answer. Um,
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  Speaker 1: But this is sort of something very much on their minds, right,
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  Speaker 1: and this affects their revenues. No, yes it does. Black
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  Speaker 1: Rock has a business managing people's cash, of business that
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  Speaker 1: it has been growing in an effort to become a
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  Speaker 1: more diversified asset managers. So while black Rock would clearly
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  Speaker 1: prefer that you put your money and actively manage mutual
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  Speaker 1: fund or into alternatives because those pay the highest fees
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  Speaker 1: and are as such the highest march in businesses, they'll
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  Speaker 1: be more than happy to take your money as a
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  Speaker 1: cash deposit and invested in short duration fixed income because
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  Speaker 1: they make something there at the same time. And to
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  Speaker 1: his point, that's an option for people. When you made
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  Speaker 1: nothing on cash, you felt like you had to be invested.
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  Speaker 1: This was the reach for yield. You had to generate income. Well,
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  Speaker 1: now you can sit on the sidelines effectively and generate
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  Speaker 1: some income too and a half eight much slightly north
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  Speaker 1: of the rate in inflation. Uh so there's a real return,
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  Speaker 1: even if it's skimpy. Do you want to just note
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  Speaker 1: that two year treasury yields are at a new post
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  Speaker 1: crisis high today at nearly two point six percent. That
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  Speaker 1: is basically double where they were nearly a year ago.
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  Speaker 1: Pen It's it's amazing if you think about it. You
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  Speaker 1: know how quickly in relative terms, short term yields have
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  Speaker 1: risen and the long term yields remain pretty well anchored.
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  Speaker 1: That's why we're talking about the flattening and potential inversion
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  Speaker 1: of the yield curve. And I'll just point out that
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  Speaker 1: Larry Fink we talked about that says he's not that
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  Speaker 1: concerned about an inversion of the yield curve because in
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  Speaker 1: his mind, the conditions are different today. This time is different,
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  Speaker 1: if you will, to paraphrase, can rogue off. It's not
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  Speaker 1: like it was the last time the yield curve inverted
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  Speaker 1: before the financial crisis or before that, and as such
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  Speaker 1: does not portend a recession. This is all about quantitative
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  Speaker 1: easing and interest rate differentials on a global basis a
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  Speaker 1: different world. All right, well you say different world. Let
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  Speaker 1: me just mentioned that we're waiting for a different world,
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  Speaker 1: which is that the President Donald Trump and President Vladimir
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  Speaker 1: Putin of Russia are scheduled to appear before the press
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  Speaker 1: uh in uh as much as they've had this meeting
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  Speaker 1: in Helsinki, and we will of course bring that to
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  Speaker 1: you live. We are awaiting there the start of that
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  Speaker 1: press conference. Um. One of the things. Also, I'm not
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  Speaker 1: gonna get into the thing about yields and taxes and
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  Speaker 1: how much you left with and all that. That's another story.
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  Speaker 1: But uh, if he can't figure out what's going to
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  Speaker 1: happen in the stock market, remember the comment that he
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  Speaker 1: made having to do with Gino earnings are pretty good.
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  Speaker 1: That was that, so I know what you, I know
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  Speaker 1: what you're getting at absent trade tensions. That's what he
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  Speaker 1: thinks would have happened. In other words, if Donald Trump
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  Speaker 1: weren't saber rattling. And it's more than saber rattling, because
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  Speaker 1: he was saying rattling during the election. He was saber
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  Speaker 1: ratting last year. He it's not like he was elected
• 10:46
  Speaker 1: just last n Back in January, Gary Cohne was still
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  Speaker 1: in the White House. There was still an active debate
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  Speaker 1: as janu Trump administration would handle trade. Cone is gone,
• 10:58
  Speaker 1: Peter Navarro is a set didn't in the White House.
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  Speaker 1: We know how Trump is handling trade. So the picture
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  Speaker 1: today is considerably different from what it was in January.
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  Speaker 1: In January was talked, Now it's real. The United States
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  Speaker 1: is unilaterally imposed tearoffs on aluminum steel, Chinese goods, imports
• 11:15
  Speaker 1: from the European Union, the retaliatory troffs. But he said
• 11:18
  Speaker 1: he he talked about He said, oh, well, you know,
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  Speaker 1: if it weren't for a couple of technology stocks, the
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  Speaker 1: market is basically flat. Worse than flat. Okay, yeah, worse
• 11:26
  Speaker 1: than flat. I don't know Boeing is up. I mean,
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  Speaker 1: it's like, I understand his point, but if he can't
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  Speaker 1: tell you what he really thinks it's going to happen
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  Speaker 1: and have it play out in reality, then with all
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  Speaker 1: due respect, his job is to make sure that you
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  Speaker 1: put your money with black Rock so that they can
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  Speaker 1: manage it as opposed to someone else, not that you
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  Speaker 1: should necessarily keep it in cash because and I don't
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  Speaker 1: mean you have to put it in black Rock to
• 11:55
  Speaker 1: keep it in cash, and put it in a bank
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  Speaker 1: and keep it in cash. And at the reality there
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  Speaker 1: is it's low risk. It's not about earning anything. It's
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  Speaker 1: about you don't risk your capital, right, not unless you
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  Speaker 1: think the US government is about to go bankrupt. Right, Yeah,
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  Speaker 1: I don't think he thinks that, right, No, he doesn't. Eric,
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  Speaker 1: I want to shift gears a little bit. You know
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  Speaker 1: that you've been interviewing a lot of luminaries and top
• 12:16
  Speaker 1: investment managers, and I'm wondering if you could just put
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  Speaker 1: your interview with Black Rocks Larry Fink into the context
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  Speaker 1: of sort of what the broader sentiment is. I mean,
• 12:26
  Speaker 1: if you could sort of say that there is a
• 12:28
  Speaker 1: consensus among the most respected investors who you interview on
• 12:32
  Speaker 1: a regular basis, what would abate that this economic expansion
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  Speaker 1: can't last much longer that we are entering and we
• 12:40
  Speaker 1: may already be there if we haven't entered it yet,
• 12:42
  Speaker 1: a period of market excess, that the kinds of risks
• 12:47
  Speaker 1: that are in that investors are prepared to take in
• 12:50
  Speaker 1: places like credit suggest that um people are getting a
• 12:55
  Speaker 1: little out over their skis, and that sooner or later
• 12:59
  Speaker 1: something is going to trigger arise in corporate defaults. And
• 13:05
  Speaker 1: then we'll see who's swimming without any trunks on. Uh.
• 13:09
  Speaker 1: This could metastasize in clos for example. UM, that's one
• 13:15
  Speaker 1: place that people consistently talk about a market where there
• 13:18
  Speaker 1: isn't a lot of transparency and they feel as though
• 13:20
  Speaker 1: there's some if you will, hidden risks. There's a lot
• 13:23
  Speaker 1: of structure, as you know in c llos, and so
• 13:26
  Speaker 1: they're not not exactly the same way, but not unlike
• 13:30
  Speaker 1: what happened in the financial crisis. There is the potential
• 13:33
  Speaker 1: for people who bought the highest yielding, lowest rated instruments
• 13:36
  Speaker 1: to lose an awful lot of money. And when people
• 13:39
  Speaker 1: lose money very quickly, they tend to do very rash
• 13:41
  Speaker 1: things and that has knock on effects and other parts
• 13:45
  Speaker 1: of financial markets. So that's one thing people are talking
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  Speaker 1: about very consistently. And the other is the potential for
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  Speaker 1: a sovereign debt crisis. The US dollar is very strong.
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  Speaker 1: That puts an awful lot of pressure on emerging markets
• 13:57
  Speaker 1: which have dollar denominated debt. It's very difficult to predict
• 14:01
  Speaker 1: exactly how it will play out, but people have likened
• 14:04
  Speaker 1: it to the Mexican peso crisis, to the Asian financial crisis,
• 14:08
  Speaker 1: of the movie never plays out the same way twice
• 14:13
  Speaker 1: or a third time. But those are the parallels that
• 14:17
  Speaker 1: I've been hurt, I've heard being drawn. Thanks very much,
• 14:20
  Speaker 1: Eric Shatzker of Bloomberg Television, Bloomberg News, Bloomberg dot Com,
• 14:24
  Speaker 1: Blomberg Radio, Bloomberg, All Things bloom All Things Bloomberg, and
• 14:27
  Speaker 1: really well done. Great the interview with Larry Fink, the
• 14:30
  Speaker 1: chief executives from of Black Rock. We're gonna find out
• 14:50
  Speaker 1: a little bit more about the retail industry right now.
• 14:54
  Speaker 1: In particular, quote in all New Jim Boree. That is
• 14:58
  Speaker 1: what Jim bore chief executive Daniel Greaseman said about their
• 15:02
  Speaker 1: new line after emerging for emerging from bankruptcy. And Daniel
• 15:06
  Speaker 1: greesmanuh grees Mare, excuse me, joins us now in our
• 15:10
  Speaker 1: Bloomberg eleven three oh studios in New York City. Uh so, Daniel,
• 15:14
  Speaker 1: thank you so much for being here, Thanks for having
• 15:16
  Speaker 1: me tell us a little bit about the new line. Well,
• 15:20
  Speaker 1: this is a culmination of maybe, um twelve thirteen months
• 15:23
  Speaker 1: worth of work. UM. The team has spent a lot
• 15:27
  Speaker 1: of time talking to our customers, talking to future customers, UM.
• 15:32
  Speaker 1: And they told us exactly what they want, and they
• 15:34
  Speaker 1: want clothes that have a high quality, high value, great
• 15:40
  Speaker 1: mix and match capability, and and it's uh, it's pretty simple.
• 15:44
  Speaker 1: Listen to the customer and they tell you what they want.
• 15:46
  Speaker 1: So that's what we h that's what we delivered. It's
• 15:48
  Speaker 1: now available nationwide and online today. Let me just go
• 15:52
  Speaker 1: back into your history just so people understand you come
• 15:55
  Speaker 1: with a lot of experience. Started at Macy's, have a
• 15:58
  Speaker 1: career at Gap Gap It's cold Water Creetillies for example. Right,
• 16:03
  Speaker 1: what have you learned from all of those experiences that
• 16:07
  Speaker 1: you can apply to a world where just about every
• 16:11
  Speaker 1: news outlet is now shouting that for the next thirty
• 16:16
  Speaker 1: six hours beginning at three three pm Eastern daylight time,
• 16:23
  Speaker 1: that Amazon is launching its Amazon Prime Day out of
• 16:27
  Speaker 1: the middle of nowhere. What do you how do you
• 16:30
  Speaker 1: reckon with that? Well? I think the years of experience
• 16:34
  Speaker 1: that I have have taught me that you have to
• 16:35
  Speaker 1: stay current, you have to stay relevant. You've got to
• 16:38
  Speaker 1: stay close to your customer, understand what it is that
• 16:41
  Speaker 1: he or she is looking for, and deliver that consistently
• 16:44
  Speaker 1: in a unique and differentiated way. If you do that,
• 16:48
  Speaker 1: you're going to be a winner. And so that's really
• 16:50
  Speaker 1: what we as a company or focused on doing. Amazon
• 16:54
  Speaker 1: is a partner of ours. Amazon, I think, is also
• 16:57
  Speaker 1: the ocean that many industry three swimming. So it's um
• 17:02
  Speaker 1: finding the right balance and creating a differentiated experience. So, Daniel,
• 17:06
  Speaker 1: you you became the chief executive in uh May. That
• 17:12
  Speaker 1: was right before the company filed for bankruptcy, and this
• 17:16
  Speaker 1: was on the heels of the one billion dollars of
• 17:18
  Speaker 1: debt that it had really stemming from the buyout from
• 17:21
  Speaker 1: Bain Capital. A lot of people have blamed private equity
• 17:24
  Speaker 1: firms for the demise of certain retailers, including Jim Boree.
• 17:28
  Speaker 1: What do you think, well, I think the the process
• 17:32
  Speaker 1: that the company went through to restructure demonstrated the respectful
• 17:36
  Speaker 1: transfer of the ownership of the company from one's ownership,
• 17:40
  Speaker 1: as you said, Bain to the group of what was
• 17:43
  Speaker 1: what were the lenders to Bain are now the owners
• 17:47
  Speaker 1: of the company, and between the banks and the former owners,
• 17:50
  Speaker 1: the new owners and the company, it was all the
• 17:54
  Speaker 1: all the specifics of the restructuring were detailed and negotiated
• 17:59
  Speaker 1: prior to sever filing. So once we filed, it was
• 18:02
  Speaker 1: a very simple and respectful transition what I'm trying to
• 18:05
  Speaker 1: get at is, do you think that Jim Boree would
• 18:08
  Speaker 1: have been fine, given what you know about the company
• 18:11
  Speaker 1: after more than a year as chief executive, that it
• 18:14
  Speaker 1: would have been fine if it hadn't been for this buyout. Um,
• 18:17
  Speaker 1: I don't know that I could say that. I think
• 18:19
  Speaker 1: I think it would have been fine if it had
• 18:22
  Speaker 1: stayed relevant and current to an ever changing retail environment
• 18:26
  Speaker 1: and customer. So yeah, And just to give a little
• 18:31
  Speaker 1: detail about the current ownership, I believe carriage House Capital, Searchlight,
• 18:38
  Speaker 1: Searchlight Brigade, Oppenheimheimer the three leads. Yet. Okay, so they've
• 18:42
  Speaker 1: given you the opportunity to remake the company. When you
• 18:47
  Speaker 1: got the job, did you think that you'd be focusing
• 18:49
  Speaker 1: on things like Instagram? Oh? Sure, yeah, it is. It
• 18:54
  Speaker 1: is how you can touch and reach out to the
• 18:57
  Speaker 1: modern customer today. So um. Yeah. And you have someone
• 19:01
  Speaker 1: to say, at Jim Burry, whose only job is to
• 19:03
  Speaker 1: focus on all of the social media connections you have
• 19:06
  Speaker 1: pretty much you have to Yeah, that's just the way.
• 19:08
  Speaker 1: That's just the way it is in a modern retail.
• 19:11
  Speaker 1: But I think it's incredibly exciting. I think this is
• 19:14
  Speaker 1: an amazing time I've never been more engaged and had
• 19:17
  Speaker 1: more fun in my entire career as as I'm having
• 19:20
  Speaker 1: right now. The team is doing extraordinary things at the company,
• 19:24
  Speaker 1: and they're they're embracing this new long term view that
• 19:29
  Speaker 1: the new owners have and the ability to take the
• 19:31
  Speaker 1: risks to do what's right for the company and for
• 19:34
  Speaker 1: the brand and for our customers. Okay, as a mother
• 19:36
  Speaker 1: of two young children, I'm curious, what's the price point
• 19:39
  Speaker 1: that's sort of ideal for children's clothing to to hit. Yeah, price,
• 19:46
  Speaker 1: you know, we asked our customer that in focus groups
• 19:48
  Speaker 1: I I conducted UM and visited focus groups around the country,
• 19:53
  Speaker 1: and it was very clear price is only one component
• 19:57
  Speaker 1: of the value proposition for for the customer. They also
• 20:01
  Speaker 1: want to know that it it is gonna last, They're
• 20:03
  Speaker 1: gonna be able to wash, it won't fade, it won't
• 20:06
  Speaker 1: wear through very quickly, it has the ability to mix
• 20:08
  Speaker 1: and match with different things. All of those are components
• 20:11
  Speaker 1: to value. So it's really a matter of value rather
• 20:16
  Speaker 1: than price. Well, I gotta say, just looking at some
• 20:19
  Speaker 1: of the videos on Twitter of the Made You Smile
• 20:23
  Speaker 1: campaign that you put together, a lot of young children
• 20:26
  Speaker 1: doing um, some pretty amazing theatrical presentations, singing and dancing.
• 20:32
  Speaker 1: Congratulations and the best luck. Thank you very much. Daniel Greasmer.
• 20:36
  Speaker 1: He is the chief executive of Jim Boree working on
• 20:40
  Speaker 1: their turnaround. Retail sales rose for a fifth consecutive month
• 20:59
  Speaker 1: in June, gains in automobiles and non store vendors showing strength.
• 21:04
  Speaker 1: Here to tell us about the retail environment is Seema Shaw,
• 21:07
  Speaker 1: Bloomberg Intelligence, senior consumer analysts. All right, Seema, what did
• 21:12
  Speaker 1: you take away from the increase overall purchases advancing a
• 21:17
  Speaker 1: half a percent prior month was revised up. That's mainly
• 21:22
  Speaker 1: because of automobiles. Automobiles and I would say gasoline, so
• 21:27
  Speaker 1: gas prices continue to go up. So but separate categories.
• 21:30
  Speaker 1: So did it pint that the other area of strength
• 21:33
  Speaker 1: was building materials, which again is not surprising giving the
• 21:36
  Speaker 1: weather and that Father's Day falls in June. To that category,
• 21:40
  Speaker 1: tent home related goods tend to benefit for that holiday,
• 21:45
  Speaker 1: So I would say those were the biggest takeaways. The
• 21:47
  Speaker 1: other thing, though, um I would say, is that you know,
• 21:51
  Speaker 1: some of these categories that were stronger before, like apparrel electronics,
• 21:55
  Speaker 1: they were a little bit weaker uh this month, um,
• 21:58
  Speaker 1: but predominantly think the games were from auto related so
• 22:03
  Speaker 1: that is I guess better for consumer spending. But again
• 22:06
  Speaker 1: autos is what drove the strength and retail sales all
• 22:08
  Speaker 1: of last year, so I think there could be some
• 22:11
  Speaker 1: moderation as we go forward. All right, so we give
• 22:14
  Speaker 1: you this as a positive reporter or negative report overall.
• 22:17
  Speaker 1: Would say overall, it's a positive report for the broad
• 22:21
  Speaker 1: scheme of spending. But again I would look at the categories.
• 22:24
  Speaker 1: Gasoline you have no choice but to buy it. Well, so,
• 22:27
  Speaker 1: if I'm hearing you correctly, there is a question between
• 22:30
  Speaker 1: discretionary spending and the purchases made their versus things that
• 22:35
  Speaker 1: you've got to spend money on. You need to fill
• 22:36
  Speaker 1: up your car, if you want to get around, you
• 22:38
  Speaker 1: need to pay rent, you need healthcare costs if you
• 22:40
  Speaker 1: get sick, So that those are accounting for a great
• 22:44
  Speaker 1: proportion of consumers purchases, it might correct in them. Yeah,
• 22:47
  Speaker 1: I would say that. And then again home being that
• 22:49
  Speaker 1: with that secular housing recovery, you're seeing strengthen those categories,
• 22:53
  Speaker 1: but otherwise you're seeing you know, deceleration other than what
• 22:56
  Speaker 1: people have to buy. At least in this report, from
• 23:00
  Speaker 1: and I know that things worse. They revised up May,
• 23:02
  Speaker 1: and May was significantly stronger because April was weaker given
• 23:06
  Speaker 1: the weather, so that it was a huge rebound and
• 23:09
  Speaker 1: spending all right, So based on all of this, two
• 23:11
  Speaker 1: consumers have more money to spend on an Amazon Prime Day. Well,
• 23:16
  Speaker 1: Amazon Prime they might, but I think it's at the
• 23:18
  Speaker 1: end of the day. It's just like Black Friday. There's
• 23:20
  Speaker 1: a lot of goods on there that you probably don't need.
• 23:22
  Speaker 1: You feel like you're getting a deal. The Amazon Prime
• 23:25
  Speaker 1: Day is longer this year. It starts today at three pm.
• 23:28
  Speaker 1: I think it goes for thirty six hours. So are
• 23:30
  Speaker 1: we so psychologically predisposed now that we will just buy
• 23:34
  Speaker 1: things even if we don't need them, just because they're
• 23:38
  Speaker 1: less expensive than they were the day before. I mean,
• 23:41
  Speaker 1: that's called human name, and it's feeling that you're getting
• 23:45
  Speaker 1: a deal, so you're going to get it if you
• 23:47
  Speaker 1: don't need the thing in the first place. Would honestly successful?
• 23:52
  Speaker 1: I mean, honestly, this reminds me of a conversation I
• 23:54
  Speaker 1: had with my husband where I used to come home
• 23:56
  Speaker 1: and I'd say, look at this dress, isn't it great?
• 23:59
  Speaker 1: And it was marked own from this there it was
• 24:01
  Speaker 1: marked down and he gave me the same mark. But
• 24:05
  Speaker 1: I mean that's like, you know, like if you don't
• 24:06
  Speaker 1: have if you don't have a kitchen, you know, buying
• 24:08
  Speaker 1: a set of pots and pants, isn't it? I agree,
• 24:11
  Speaker 1: But there are smaller things, and there's a lot of
• 24:13
  Speaker 1: nice to have, and I think this inspires people to
• 24:16
  Speaker 1: get it. Or perhaps you could argue there's a few
• 24:19
  Speaker 1: set of people who are going early for Christmas shopping
• 24:22
  Speaker 1: and they'll get a good deal and they'll save it.
• 24:24
  Speaker 1: But okay, in fairness, we can put aside this argument
• 24:27
  Speaker 1: as the American dream and challenging it because frankly, it's
• 24:29
  Speaker 1: always been the case that we've been built on consumerism.
• 24:32
  Speaker 1: But I am wondering, you know, about the sort of
• 24:34
  Speaker 1: consumer purchasing power. I was struck by a statistics showing
• 24:39
  Speaker 1: that real wages have not increased at all in the
• 24:42
  Speaker 1: past year, even as actual straight wages increase, but the
• 24:47
  Speaker 1: inflation the cost of goods has gone up equally, right.
• 24:51
  Speaker 1: I mean, it's in your it's in your deck. I
• 24:52
  Speaker 1: mean this to me is really important to take note of. No, absolutely,
• 24:56
  Speaker 1: and you already mentioned that housing, healthcare, and energy cost
• 25:00
  Speaker 1: that's what they have to spend on that's going up.
• 25:02
  Speaker 1: But I think a lot of the purchasing you're seeing
• 25:04
  Speaker 1: is done on credit. You're seeing household is very interesting
• 25:09
  Speaker 1: going up um And I know that maybe people are
• 25:11
  Speaker 1: on as much of a dire straight as they were
• 25:13
  Speaker 1: during the recession, but still I think it's notable that
• 25:16
  Speaker 1: there is a change. People are spending more, but the
• 25:19
  Speaker 1: way there was no wage increase despite the tax cut. Right,
• 25:23
  Speaker 1: maybe a few people got a thousand dollar bonus here
• 25:25
  Speaker 1: and there, that's not enough to be a game changer. Right.
• 25:28
  Speaker 1: Most of the money from the tax cuts corporations used
• 25:30
  Speaker 1: for buy backs, right, So the end consumer is not
• 25:34
  Speaker 1: getting that in terms of wages, so they have to
• 25:36
  Speaker 1: be putting that money on the credit pim. We saw
• 25:39
  Speaker 1: this with Bank of America's earnings where they reported the
• 25:43
  Speaker 1: best revenues from consumer credit lending in years, and they're
• 25:49
  Speaker 1: expanding in that area and say said, you know, yeah,
• 25:52
  Speaker 1: we are watching the credit quality of our borrowers. So
• 25:55
  Speaker 1: far it looks okay, but we are expanding cause it's lucrative.
• 25:58
  Speaker 1: But this is really interesting to be because if this
• 26:00
  Speaker 1: is what you're saying, is plugging the gap between people's
• 26:04
  Speaker 1: ability to buy these things because of an increase in
• 26:06
  Speaker 1: wages or lack thereof. Um, you just have to wonder.
• 26:09
  Speaker 1: People are living on their credit cards. I mean, that's
• 26:12
  Speaker 1: what they do. And you tell me that you know,
• 26:14
  Speaker 1: this kind of shopping is almost psychologically essential, right, I
• 26:18
  Speaker 1: mean they have to do it because the deals are
• 26:21
  Speaker 1: so great. You need that other flat panel television, And
• 26:25
  Speaker 1: all you gotta do is look at the mail or
• 26:27
  Speaker 1: the post that you receive. And I don't know about you,
• 26:29
  Speaker 1: but I mean if I had a penny for every
• 26:31
  Speaker 1: offer for new credit cards, I am shocked by the
• 26:36
  Speaker 1: volume that I've been receiving. Okay, but I want to
• 26:38
  Speaker 1: I want to push back a little bit because consumers
• 26:41
  Speaker 1: were actually fairly prudent, and US consumers hadn't releveraged barring
• 26:45
  Speaker 1: like auto loans for a number of years. Are we
• 26:47
  Speaker 1: reaching a threshold, a tipping point where you're starting to
• 26:51
  Speaker 1: see greater releveraging and at a faster pace than we
• 26:54
  Speaker 1: have in the past. I mean it appears that way
• 26:57
  Speaker 1: if you just look at the credit card data, and
• 26:58
  Speaker 1: you're saying, at the same time, improvements and sales for
• 27:02
  Speaker 1: many retailers or retail sales, but you're not seeing an
• 27:06
  Speaker 1: increase in wages. So to me, it has to come
• 27:08
  Speaker 1: from somewhere. So where else would it be coming from
• 27:11
  Speaker 1: other than credit? Because necessities continue to rise, So I
• 27:15
  Speaker 1: would imagine that most of the wages that you have
• 27:17
  Speaker 1: would go to those things. And here just to just
• 27:19
  Speaker 1: to give you, you know, not to because I mean,
• 27:21
  Speaker 1: I know we're focused on retail sales, but it's also
• 27:23
  Speaker 1: about you know, what else you can do with the money.
• 27:26
  Speaker 1: We've all read these stories, but I mean, for Americans
• 27:31
  Speaker 1: have less than ten thousand dollars tucked away for retirement,
• 27:37
  Speaker 1: and there was an article recently that if a majority
• 27:40
  Speaker 1: of many Americans there was an emergency where they needed
• 27:42
  Speaker 1: like thousand dollars in cash, they wouldn't have it in
• 27:46
  Speaker 1: their account. And I think broader to this, I mean,
• 27:48
  Speaker 1: you have to worry if we continue to have tariffs
• 27:51
  Speaker 1: implemented on items as it moves to goods consumers purchased,
• 27:55
  Speaker 1: and the price of that is going to go up,
• 27:56
  Speaker 1: and you know that would impact also because again their
• 27:59
  Speaker 1: wage is aren't going up commensurate with cost of goods.
• 28:03
  Speaker 1: Thank you very much setting us straight. See Michelle Bloomberg.
• 28:06
  Speaker 1: Intelligence is own senior consumer analysts, giving us the details
• 28:10
  Speaker 1: on US retail sales. Thanks for listening to the Bloomberg
• 28:16
  Speaker 1: P and L podcast. You can subscribe and listen to
• 28:19
  Speaker 1: interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer.
• 28:24
  Speaker 1: I'm pim Fox. I'm on Twitter at pim Fox. I'm
• 28:28
  Speaker 1: on Twitter at Lisa Abramo wits one. Before the podcast,
• 28:31
  Speaker 1: you can always catch us worldwide on Bloomberg Radio