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Consumers Took On Debt To Cover Holiday Spending: Creditntell · 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
• 0:06
  Speaker 1: we bring you interviews from CEOs, market pros, and Bloomberg experts,
• 0:10
  Speaker 1: along with essential market moving news. Find the Bloomberg Markets
• 0:13
  Speaker 1: Podcast on Apple Podcasts or wherever you listen to podcasts,
• 0:17
  Speaker 1: and on Bloomberg dot com. Retail sales, we've got some
• 0:20
  Speaker 1: numbers out this morning, weaker than expected, wrapping up a
• 0:23
  Speaker 1: very difficult year for merchants. Let's get a sense of
• 0:27
  Speaker 1: what's going on in the world of retail, and we
• 0:29
  Speaker 1: could do that with one of the smartest voices out
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  Speaker 1: there on retail. That's Sma Shaw. She's director of Consumer
• 0:35
  Speaker 1: and Retail Trends ACT Credit Intel, joining us on the
• 0:38
  Speaker 1: phone from Long Island. Sema, thanks so much for joining
• 0:40
  Speaker 1: us here. Again, some weaker than expected retail sales this morning.
• 0:45
  Speaker 1: How's the consumer doing well? I think you have to
• 0:49
  Speaker 1: step back and think about how they have been doing
• 0:52
  Speaker 1: the whole year. I mean they have been pressured significantly
• 0:55
  Speaker 1: by the high levels of unemployment due to the pandemic.
• 0:59
  Speaker 1: This emulus there was one in April and then one
• 1:02
  Speaker 1: that just hit in January, but it's quite a wide
• 1:04
  Speaker 1: time period, so I think people um were really struggling.
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  Speaker 1: But at the same time, they are still spending, but
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  Speaker 1: they've changed the way that they spent. They shifted um
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  Speaker 1: to online and in many cases they took on debt
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  Speaker 1: in order to pay for their holiday purchases, which is
• 1:20
  Speaker 1: somewhat why we've seen some positive numbers out of certain
• 1:24
  Speaker 1: categories and certain retailers. Which is going to store up
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  Speaker 1: trouble down the line, right, what if those retailers themselves
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  Speaker 1: go broke or bust. I mean, at that point, does
• 1:33
  Speaker 1: the credits on the part of consumers just get wiped away.
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  Speaker 1: If the retailer goes bankrupt and they're owed money from
• 1:45
  Speaker 1: these consumers, it's it's likely the consumer will just never
• 1:48
  Speaker 1: pay because whatever assets are owned by the bankrupt retailer
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  Speaker 1: will be taken um or you know, in order of
• 1:56
  Speaker 1: seniority by their debt holders. UM. But it's just more
• 2:00
  Speaker 1: this is more of a risk of just pushing the problem,
• 2:02
  Speaker 1: you know, down the line and consumers. You know, Joe
• 2:05
  Speaker 1: Biden released his plan last night, but you know, we
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  Speaker 1: really need to see a huge uptick and a reversal
• 2:11
  Speaker 1: and the employment numbers, uh, in order to see this
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  Speaker 1: ability to continue to spend without having too much debt,
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  Speaker 1: right and so yeah, so seem that there's one of
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  Speaker 1: the things we hear about a lot of you know,
• 2:24
  Speaker 1: is that consumers savings are really ramping up, and that potentially, uh,
• 2:30
  Speaker 1: that could be pent up demand, pent up spending. When
• 2:33
  Speaker 1: we get to the other side of that, what are
• 2:34
  Speaker 1: the retailers saying about that opportunity for growth maybe in
• 2:38
  Speaker 1: the second half of this year. They don't comment so
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  Speaker 1: much on the spending rate. And while I agree there
• 2:45
  Speaker 1: probably has been some increased savings simply because there's there
• 2:49
  Speaker 1: was nowhere to go or nothing to necessarily buy um,
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  Speaker 1: there is still a more a large person of the
• 2:56
  Speaker 1: population that had to dip into savings to manage their
• 3:00
  Speaker 1: household bills over the last nine months. And I don't
• 3:04
  Speaker 1: think that that will change anytime soon. But what will
• 3:07
  Speaker 1: change is that if there is an uptick, we should
• 3:10
  Speaker 1: start seeing an uptick across retails, particularly the more depressed
• 3:14
  Speaker 1: categories like apparel, but we should also see a surge
• 3:17
  Speaker 1: and travel and experience oriented uh type of retailers or
• 3:23
  Speaker 1: companies you know, including restaurants and bars. Well, actually will
• 3:27
  Speaker 1: be Out got a story I finished by Jordan Holman
• 3:31
  Speaker 1: about November and December retail sales gains, the NRS saying
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  Speaker 1: that there were eight point three from a year earlier
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  Speaker 1: in the group of priory forecast just a gain of
• 3:41
  Speaker 1: three point six to five point two. Is most of
• 3:43
  Speaker 1: that then on credit cards? Using seema, I think a
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  Speaker 1: large portion of that is on credit cards. And another
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  Speaker 1: reason why I would think that is also because there's
• 3:52
  Speaker 1: a huge surgeon online sales and digital sales obviously require
• 3:56
  Speaker 1: typically a credit card to complete the transaction. So I
• 4:00
  Speaker 1: I definitely think there's a lot of pushing the problem
• 4:03
  Speaker 1: off to the future for sure. Hey see, but one
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  Speaker 1: of the things that we've talked about with you in
• 4:08
  Speaker 1: the past is kind of just the retail footprint in
• 4:10
  Speaker 1: this country, maybe still too overstored in this country. What
• 4:15
  Speaker 1: has the pandemic done to the store footprint and kind
• 4:19
  Speaker 1: of how do you think that's going to play out,
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  Speaker 1: you know, over the next year or so. Right, This
• 4:24
  Speaker 1: is something that we get Credidental have looked at quite closely.
• 4:28
  Speaker 1: So the initial impact from the pandemic was clearly that
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  Speaker 1: any retailers that were struggling around the brink, those went
• 4:35
  Speaker 1: bankrupt and that in many cases led to UH store
• 4:38
  Speaker 1: liquidations and massive store closures. UM. As we've progressed, the
• 4:42
  Speaker 1: retailers that have continued to hang on, a lot of
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  Speaker 1: what we're seeing is they're thinking of rethinking their footprints,
• 4:49
  Speaker 1: optimizing their footprint because of the impact of online and
• 4:52
  Speaker 1: the fact that online is becoming more important and it's
• 4:55
  Speaker 1: really more about being an omni retailer versus just multiple channel.
• 4:58
  Speaker 1: So I still think continue to see retailers trim their footprints.
• 5:02
  Speaker 1: UM and you'll focus on stores that are outperforming. So
• 5:05
  Speaker 1: you see this in Dead Bath and beyond this clothing
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  Speaker 1: a fair numbers stores they also sold two banners, and
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  Speaker 1: other retailers are doing the same thing to you know,
• 5:12
  Speaker 1: find the better locations and keep the ones that are
• 5:14
  Speaker 1: performing the beast. I mean, you have the Dragon Sail.
• 5:18
  Speaker 1: Will they all just move to Amazon? Are you talking
• 5:22
  Speaker 1: about consumers? I mean, I'm talking about all the male
• 5:25
  Speaker 1: stores that have to close, the twelve thousand that we
• 5:27
  Speaker 1: know that are closing around the country. I mean, they
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  Speaker 1: have merchandise, and they have good brands. Do they just
• 5:33
  Speaker 1: sell them via Amazon? Um, there will be a portion
• 5:37
  Speaker 1: who do that, but there are also other companies that
• 5:40
  Speaker 1: buy sort of brands that have struggled to like pier
• 5:43
  Speaker 1: One was purchased by a company and then they start
• 5:46
  Speaker 1: recreating merchandise and selling just online. So I think you'll
• 5:49
  Speaker 1: see some portion go to Amazon, but you might also
• 5:51
  Speaker 1: see people create shops like on Shopify or something like
• 5:55
  Speaker 1: to that then to create versus being on Amazon, because
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  Speaker 1: Amazon is a huge competitive rest so they might be
• 6:01
  Speaker 1: better off doing it on Shopify where they can control
• 6:04
  Speaker 1: their inventory and they can see what consumers are. Thank
• 6:08
  Speaker 1: you so much, always abasure speaking with you, Michelle. They're
• 6:11
  Speaker 1: all credits Intel. One of the bigger themes we've talked
• 6:16
  Speaker 1: about over the last several years has been the convergence
• 6:19
  Speaker 1: between media and technology, and arguely, this pandemic and the
• 6:23
  Speaker 1: changing consumer habits has really accelerated that trend. And there's
• 6:27
  Speaker 1: nobody better on Wall Street to talk about this big
• 6:29
  Speaker 1: trend than Laura Martin. She's a senior analyst at Needham
• 6:33
  Speaker 1: and Company based in Los Angeles. Laura, thanks so much
• 6:36
  Speaker 1: for joining us here. It's been a crazy time obviously
• 6:39
  Speaker 1: in markets. It's been a crazy time in terms of
• 6:41
  Speaker 1: consumer behavior as it relates to how we consume media,
• 6:45
  Speaker 1: and technology. What are some of the big themes you're
• 6:48
  Speaker 1: looking at investors? So I think our biggest theme is
• 6:53
  Speaker 1: this streaming theme, which squarely sits at the intersection of
• 6:56
  Speaker 1: technology and media and specifically ad driven streaming. So um,
• 7:00
  Speaker 1: the streaming installed based devices like connected TVs and streaming
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  Speaker 1: sticks doubled during the pandemic, and that benefited Netflix subscribers,
• 7:10
  Speaker 1: Disney subscribers who lose subscribers. But who it didn't benefit
• 7:14
  Speaker 1: is the advertising driven streaming services like Roku, because advertising
• 7:18
  Speaker 1: was thirty billion dollars lower than it was supposed to
• 7:21
  Speaker 1: be last year because entire categories were turned off. We
• 7:24
  Speaker 1: think that then reverses in and the subscriptions streaming services
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  Speaker 1: like Netflix lose subscribers. We haven't underperformed there, and instead
• 7:33
  Speaker 1: they pivot to things like Roku and Pluto and to Be,
• 7:37
  Speaker 1: which are ad driven because advertising is going to come
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  Speaker 1: back in, right, and it does feel like there has
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  Speaker 1: to be some kind of consolidation, right. Many people who
• 7:45
  Speaker 1: hadn't called the chord had been adding one or two
• 7:48
  Speaker 1: services here and there, and then COVID hit and I
• 7:51
  Speaker 1: don't know, but I added everything I could find. If
• 7:54
  Speaker 1: you know, it didn't really matter what price point, if
• 7:57
  Speaker 1: it was free, it was no more valuable to me
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  Speaker 1: than if it was you know, twenty bucks and months.
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  Speaker 1: Do people like me get rid of some of these
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  Speaker 1: you know tell me my future? Uh? They do. I
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  Speaker 1: would say this is non consensus for you, but I
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  Speaker 1: absolutely think you do. As you go back into the
• 8:13
  Speaker 1: real world's dinner with friends and two movies with your kids.
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  Speaker 1: All of these uh in person events after post vaccine
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  Speaker 1: are going to take away time in home. So the
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  Speaker 1: price value relationship every month gets worse and worse as
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  Speaker 1: you go back into the real world. And so I
• 8:30
  Speaker 1: think that the services that you use less or if
• 8:32
  Speaker 1: you've watched all the Netflix content, you're like, I'll take
• 8:34
  Speaker 1: a break from Netflix for six months, come back to
• 8:37
  Speaker 1: it later and I'll watch my HBO now. And you
• 8:39
  Speaker 1: know you saw a Paramount Plus is gonna launch. We
• 8:42
  Speaker 1: just got the launch of Discovery Plus, which has interesting content.
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  Speaker 1: I think people are going to turn more between services
• 8:48
  Speaker 1: as well, but have a core like three or four
• 8:50
  Speaker 1: services total is my guest. Hey, laur No media company,
• 8:55
  Speaker 1: I would argue on the Planet has done a bigger
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  Speaker 1: pivot towards the streaming business than the Disney Company with
• 9:02
  Speaker 1: their Disney Plus and their ESPN plus and so on.
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  Speaker 1: Are you surprised that well the stock has performed as
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  Speaker 1: they make this pivot and lose so much of their
• 9:12
  Speaker 1: existing profitability on something that may be a little bit unproven.
• 9:15
  Speaker 1: Are you surprised that how well the stock is done
• 9:17
  Speaker 1: near and all time high? I am, and I will
• 9:20
  Speaker 1: uh By Polly and I followed this company for twenty
• 9:23
  Speaker 1: years together for competitors, so I would say, I am.
• 9:27
  Speaker 1: I would say part of the Disney h stock writes
• 9:30
  Speaker 1: improvement is about the reopen trade. Because these same parks
• 9:33
  Speaker 1: which used to be thirty of you are shut down
• 9:36
  Speaker 1: and earning zero. So I think part of it is
• 9:38
  Speaker 1: the reopen trade on the same parks and the cruise
• 9:41
  Speaker 1: ships coming back and the theaters too coming back. So
• 9:45
  Speaker 1: it is a reopen trade as well as being a streaming,
• 9:48
  Speaker 1: absolutely streaming pivot trade as well. Yeah, I mean, is
• 9:52
  Speaker 1: there any legal liability at any point? To be We
• 9:54
  Speaker 1: hear about you know, Disney having to sequesters on tourists
• 9:58
  Speaker 1: and you know, their very own theme bar without a theme.
• 10:03
  Speaker 1: I like that the same part without Okay, yes, I
• 10:05
  Speaker 1: do think so, but I'm hoping, you know, post pandemic.
• 10:08
  Speaker 1: I would say Disney has a lot of Ernie's momentum
• 10:11
  Speaker 1: to the upside because it is getting hurt in the
• 10:13
  Speaker 1: media space the most right now. And I think it's
• 10:16
  Speaker 1: sort of courageous of them to just keep spending money
• 10:18
  Speaker 1: on streaming. I think they've really committed to that strategically,
• 10:22
  Speaker 1: so I think that's courageous. And they started with a
• 10:23
  Speaker 1: double A balance sheet, so they're gonna have plenty of
• 10:26
  Speaker 1: financial with what're all to do it all to keep
• 10:28
  Speaker 1: up with streaming and to have no money coming in
• 10:31
  Speaker 1: from their core businesses. But that should reverse itself next year. So,
• 10:36
  Speaker 1: Laura you mentioned do you have an underperformed rating on
• 10:38
  Speaker 1: Netflix that is certainly out of consensus with twenty eight buys,
• 10:41
  Speaker 1: ten holds and only six cells are underperforms. What's your
• 10:45
  Speaker 1: thesis there? So our thesis there is not only that
• 10:48
  Speaker 1: there's you'd rather, We'd rather be somewhere else, sicklessly, we
• 10:52
  Speaker 1: more ad driven and less description driven. There's much more
• 10:54
  Speaker 1: upsides to earning in ad driven businesses as the vaccine
• 10:58
  Speaker 1: rolls out, so that's part of it. And then more secularly,
• 11:02
  Speaker 1: and I'd be shocked if you didn't agree with US
• 11:04
  Speaker 1: follows a long time meeting Alice, I really do believe
• 11:06
  Speaker 1: in the bundles and an integration. So for example, Discovery
• 11:11
  Speaker 1: Plus and now Paramount Plus will have five revenue streams
• 11:14
  Speaker 1: for the same piece of content. Netflix has one, and
• 11:18
  Speaker 1: it can't cross promote other things like theme parks or
• 11:21
  Speaker 1: Merge or ABC's entertainment. It has no other revenue streams
• 11:26
  Speaker 1: and it's about to go to war for the next
• 11:27
  Speaker 1: five years with deep pocketed multi stylo dister subscidioes. TBS
• 11:33
  Speaker 1: has a billion five or free cash flow, free cash
• 11:35
  Speaker 1: flow and seventeen assets that can can monetize content of seventeen. Well,
• 11:41
  Speaker 1: it's going to be such an exciting time because you
• 11:43
  Speaker 1: also cover the gamers and they're going to be exciting too.
• 11:46
  Speaker 1: But Laura, you know a little niche question Fubo TV,
• 11:50
  Speaker 1: what ends up happening with it? So Football TV is
• 11:53
  Speaker 1: doing something really interesting, um and that and so and
• 11:57
  Speaker 1: and that's so. Therefore the contentious, polarizing stock. If we're
• 12:00
  Speaker 1: going to try to do is integrate for betting onto
• 12:03
  Speaker 1: the face of a digit of streaming service to focus
• 12:07
  Speaker 1: on sports. If they get that done, it will become
• 12:10
  Speaker 1: the savior of the linear TV bundle for car Charter
• 12:13
  Speaker 1: and Altise and Comcast, those big companies can't do it
• 12:17
  Speaker 1: because high you know, high priced, high powered Silicon Valley
• 12:22
  Speaker 1: twenty year olds won't go work for those big companies.
• 12:24
  Speaker 1: But Bubo is hiring those tech geniuses to try to
• 12:27
  Speaker 1: figure out how to integrate sports wagering onto the screen
• 12:31
  Speaker 1: while you watch a game. Very interesting, Laura, What are
• 12:34
  Speaker 1: your thoughts on the cable stock for here, the Comcast
• 12:36
  Speaker 1: and the Charters of the world. Um, So, I think
• 12:40
  Speaker 1: they're hedged, you know. I think this riot and streaming
• 12:43
  Speaker 1: people call up their cable operator and need faster speeds,
• 12:46
  Speaker 1: and they pay more so their hedges and streaming, and
• 12:48
  Speaker 1: they have eighty percent margins in their modem business. I
• 12:52
  Speaker 1: think the regulatory scrutiny will no longer be on them.
• 12:55
  Speaker 1: I think it's all about big tech. The regulators are
• 12:57
  Speaker 1: really going to focus on these this Twitter, you know, Twitter, Facebook,
• 13:02
  Speaker 1: YouTube all banning your Republicans. It's gonna is scaring the UH,
• 13:08
  Speaker 1: scaring Washington d C. And they really want to moderate
• 13:11
  Speaker 1: the power of these big texts. So I think cable
• 13:13
  Speaker 1: doesn't have a regulatory issue, which is a big deal.
• 13:15
  Speaker 1: Um so um, I like the cable stocks, but I
• 13:18
  Speaker 1: don't cover them all. Yeah, but Laura, Paul is going
• 13:21
  Speaker 1: to say a boy in a moment, but we will
• 13:24
  Speaker 1: have maybe a podcast or something a little different. I
• 13:28
  Speaker 1: want to hear all those stories, but your time competing
• 13:31
  Speaker 1: with Paul investment, banking and analysis, and we'll get the
• 13:35
  Speaker 1: on the side and maybe put it as an add
• 13:36
  Speaker 1: on to our podcast to tape or something like that.
• 13:41
  Speaker 1: So Paul, thank you, and thank you to Laura from
• 13:45
  Speaker 1: need him. That is Laura Martin, Senior analyst at Needham
• 13:48
  Speaker 1: and Company. We've been speaking for years. But of course,
• 13:49
  Speaker 1: said Paul, I didn't know she was your competitor. Yeah,
• 13:52
  Speaker 1: we were. We we worked together, then we competed against
• 13:54
  Speaker 1: each other. So we've been covering this media space for
• 13:57
  Speaker 1: a long time. So she's one of the best. It
• 14:01
  Speaker 1: is now time to get an update on the vaccine
• 14:04
  Speaker 1: distribution process and where we are with coronavirus as we
• 14:07
  Speaker 1: know already at records. Lawrence Ower is Assistant Professor of
• 14:11
  Speaker 1: Emergency Medicine at Johns Hopkins University. Lauren, we just had
• 14:14
  Speaker 1: a headline cross the Bloomberg. Mayor Bill de Blasio of
• 14:16
  Speaker 1: New York City saying that New York City is going
• 14:18
  Speaker 1: to run out of vaccine doses next week. What is
• 14:23
  Speaker 1: the point of advertising this? I mean, are there blockages
• 14:28
  Speaker 1: that are just you know, frustrating this mayor, and and
• 14:32
  Speaker 1: if so, what can we do about it? Yeah, I
• 14:35
  Speaker 1: do think it's a bit of um frustration. Um, the
• 14:38
  Speaker 1: both the Blasio and Governor Cuomo have really had put
• 14:43
  Speaker 1: a hard push forward for getting more vaccine into their
• 14:47
  Speaker 1: state and city. And I know that New York did
• 14:50
  Speaker 1: just expand to begin to vaccinate their elderly populations as well,
• 14:54
  Speaker 1: which many states across the country are doing, especially given
• 14:57
  Speaker 1: the challenges with getting vaccines to the healthcare worker population
• 15:01
  Speaker 1: and the essential personnel population. Um. So they want to
• 15:05
  Speaker 1: use the vaccination, the vaccine that they have on hand
• 15:08
  Speaker 1: and get that into as many people who are willing
• 15:10
  Speaker 1: to take it as possible. And New York opened up
• 15:12
  Speaker 1: a bunch of vaccine hubs, so they they built these
• 15:16
  Speaker 1: major or are building these major sites to really distribute
• 15:19
  Speaker 1: vaccine quickly. So I think a big piece of this
• 15:20
  Speaker 1: is actually a push, you know, to put a little
• 15:23
  Speaker 1: pressure on the federal government to say, hey, we're doing
• 15:26
  Speaker 1: our part now New Years to get us vaccine as
• 15:28
  Speaker 1: quickly as possible, Lauren. You know, actually in my Twitter feed,
• 15:33
  Speaker 1: I would say, over the last day or two, I'm
• 15:34
  Speaker 1: seeing more stories that perhaps, um, you know, the cases
• 15:39
  Speaker 1: you know, the vaccine, I mean, the number of cases
• 15:42
  Speaker 1: in hospitals maybe peeking and turning down, the number of
• 15:46
  Speaker 1: infections being reported maybe turning down. Are you seeing that
• 15:50
  Speaker 1: at Johns Hopkins. I'll tell you right now, we are
• 15:53
  Speaker 1: not feeling that we've had a little bit of a
• 15:54
  Speaker 1: leveling off is probably the best place we could get.
• 15:58
  Speaker 1: But um, you know, that might just be that people
• 16:01
  Speaker 1: are trying to avoid coming into the hospital m because
• 16:05
  Speaker 1: they've heard so much about this crisis space that many
• 16:08
  Speaker 1: hospitals across the state and across the country are in. Right. So, UM,
• 16:12
  Speaker 1: if I was mildly ill or had even moderate symptoms
• 16:16
  Speaker 1: and I heard that the hospitals were just sending people home,
• 16:19
  Speaker 1: you know, to complace at home, or um that hospitals
• 16:22
  Speaker 1: were in crisis mode, and I might be transported to
• 16:24
  Speaker 1: a field hospital, people might second guess their decision to
• 16:28
  Speaker 1: go to a hospital. UM. So I think we're all
• 16:30
  Speaker 1: hopeful that perhaps there is a leveling off happening um
• 16:34
  Speaker 1: across the country. But I think we're also waiting to
• 16:36
  Speaker 1: see you know, we're on the tail end of that
• 16:39
  Speaker 1: New Year's and Christmas holiday travel. Um, so it could
• 16:42
  Speaker 1: get worse again before it gets better. Yeah, it's interesting.
• 16:46
  Speaker 1: When will we see the peak of what might have
• 16:49
  Speaker 1: gone on over the holidays. I mean, we're already two
• 16:52
  Speaker 1: weeks into January. I would have thought that we'd have
• 16:55
  Speaker 1: seen the peak from at least the holiday meetings by now. Yeah,
• 16:59
  Speaker 1: I think there is still a ton of virus out
• 17:03
  Speaker 1: there in the communities across the country. So um, and
• 17:06
  Speaker 1: and anecdotally we're hearing from friends and colleagues that, Um,
• 17:10
  Speaker 1: there's people who have been very cautious throughout all of
• 17:14
  Speaker 1: this who are exhausted of being cautious and are sort
• 17:17
  Speaker 1: of letting their guard down. And so there might be
• 17:19
  Speaker 1: this whole population of people who have been very safe,
• 17:22
  Speaker 1: very cautious, taken all the necessary precautions, and um, if
• 17:25
  Speaker 1: they start to let their guard down, that's an entire
• 17:27
  Speaker 1: new group of potential people that could be exposed to
• 17:31
  Speaker 1: this virus. And thing about the communities, Lauren, what do
• 17:34
  Speaker 1: you and your colleagues in the healthcare industry expect to
• 17:38
  Speaker 1: change from the Trump administration to the Biden administration in
• 17:43
  Speaker 1: terms of federal management of this crisis and now perhaps
• 17:47
  Speaker 1: federal management of vaccine distribution. I think that's what we're
• 17:51
  Speaker 1: all looking for right as federal management. And so I
• 17:54
  Speaker 1: think that the biggest hope that a lot of us
• 17:58
  Speaker 1: have is that we'll see a more system adic approach
• 18:01
  Speaker 1: across the country, more guidance, more UM clear direction from
• 18:06
  Speaker 1: both Operation warp Feed or whatever it turns into, but
• 18:09
  Speaker 1: also from our UM, you know, really important long trusted,
• 18:13
  Speaker 1: long held public health agencies UM, particularly CDC, that they're
• 18:18
  Speaker 1: going to issue guidance that's going to be clear, direct
• 18:21
  Speaker 1: to think, and implementable, and that states across the country
• 18:24
  Speaker 1: can really implement it. I also think people are sort
• 18:27
  Speaker 1: of crossing their fingers for a national mask mandate. I
• 18:30
  Speaker 1: think that could UM really do a lot of good
• 18:33
  Speaker 1: across the country UM in slowing the spread and putting
• 18:36
  Speaker 1: a damper on those cases. Yeah. Interesting, we have one
• 18:39
  Speaker 1: in Congress at least now, Lauren, you know, and I'm
• 18:42
  Speaker 1: concerning a little on New York because they're the governors
• 18:44
  Speaker 1: I tend to see in in in you know, my
• 18:47
  Speaker 1: headlines here on the Bloomberg Given that I'm in New
• 18:50
  Speaker 1: York City, but Governor Cuomo did seem to do a
• 18:52
  Speaker 1: little bit of U turn recently talking about how we
• 18:54
  Speaker 1: need to reopen the economy and we need to find
• 18:56
  Speaker 1: more ways to let businesses reopen safely. I mean, given
• 19:00
  Speaker 1: that we're in a more dangerous time now than ever,
• 19:04
  Speaker 1: is that wise? You know? I think, Um, we in
• 19:08
  Speaker 1: public health get sort of this bad rep of not
• 19:11
  Speaker 1: wanting the economy open. And no one wants the economy
• 19:13
  Speaker 1: open and successfully running more than us. You know. It's
• 19:17
  Speaker 1: the economy is so critically important to our ability to
• 19:21
  Speaker 1: manage this virus long term, right, Um, it's a functioning
• 19:26
  Speaker 1: economy is absolutely critical. But the way to get to
• 19:29
  Speaker 1: a functioning economy is to reduce the amount of virus
• 19:31
  Speaker 1: is circulating in the population so that people can safely
• 19:34
  Speaker 1: go about, um their business. And so I think both
• 19:39
  Speaker 1: reopening the economy and getting schools back on track has
• 19:42
  Speaker 1: to be a priority. Um, But it has to be
• 19:45
  Speaker 1: done safely, or else we're just going to be in
• 19:46
  Speaker 1: this endless cycle of opening and closing and opening and
• 19:50
  Speaker 1: closing and opening and closing. So that the key, I
• 19:52
  Speaker 1: think is to get those policies in place to get
• 19:55
  Speaker 1: rid of the virus as quickly as possible. Vaccine is
• 19:58
  Speaker 1: going to help, but solo masks and so well continued
• 20:00
  Speaker 1: social distancing until we get there. Lawrence Sour, thank you
• 20:04
  Speaker 1: so much for joining us. Once again, we always appreciate
• 20:06
  Speaker 1: your insights, Lawrence Sour. She's Associate Professor of Emergency Medicine
• 20:11
  Speaker 1: at the JOHNS Hopkins School of Medicine. Uh bloo bloom
• 20:14
  Speaker 1: Bloomberg School of Public Health is supported by Michael R. Bloomberg,
• 20:18
  Speaker 1: founder of Bloomberg LPEO Bloomberg Philanthropies and this radio operation
• 20:24
  Speaker 1: all right, well, we are going to have a conversation
• 20:26
  Speaker 1: now about banks because right now the world's hardgo coal
• 20:30
  Speaker 1: is ongoing. We got wells and we got cities so
• 20:33
  Speaker 1: far today. So let's bring in Alison Williams, Senior Industry
• 20:37
  Speaker 1: Analystic Global Investment, Banks and Asset Management at Bloomberg Intelligence.
• 20:41
  Speaker 1: And of course, as always we have our cross Asset
• 20:43
  Speaker 1: reporter Sarah pon Zach here with us. Alison, thanks for
• 20:45
  Speaker 1: jumping off the call. Charlie Sharf with some very colorful language,
• 20:50
  Speaker 1: let's put it that way. He says that the goal
• 20:52
  Speaker 1: is to be the pre eminent provider of US financial services,
• 20:54
  Speaker 1: and the strategy is about becoming crisper about target markets.
• 20:58
  Speaker 1: It all sounds a little bit vague and hopeful to me,
• 21:01
  Speaker 1: Am I being too cynical. Well, I think that that
• 21:05
  Speaker 1: is UM perhaps some of the frustration that investors are
• 21:09
  Speaker 1: feeling with UM Wells Fargo. So UM. You know, Charlie
• 21:12
  Speaker 1: has has sort of been in his seat for a
• 21:14
  Speaker 1: while now, and since that day, investors have been waiting
• 21:19
  Speaker 1: UM to see how his strategy is going to reshape
• 21:23
  Speaker 1: the bank. And one of the biggest levers is costs UM.
• 21:28
  Speaker 1: So so two things. So first UM, I think investors
• 21:31
  Speaker 1: are still waiting to get more more detail on the
• 21:33
  Speaker 1: bigger picture strategy. But the two numbers that we got
• 21:36
  Speaker 1: today we're disappointing. And so costs looking um higher than
• 21:40
  Speaker 1: expected for this year and that interest income looking lower
• 21:44
  Speaker 1: than than expected. So both of those are negatives. But
• 21:47
  Speaker 1: but it's really the cost um side that things are
• 21:50
  Speaker 1: focused on. And and the other tie in that I'll
• 21:53
  Speaker 1: perhaps make to UM, JP, Morgan UM and black Rock
• 21:56
  Speaker 1: which we got yesterday, to banks that are actually executing
• 22:01
  Speaker 1: a very strongly gaining share in their businesses. But both
• 22:04
  Speaker 1: of those companies talking about higher investment spending. Wells Fargo
• 22:08
  Speaker 1: also UM outlining its investment spend UM, which may be
• 22:12
  Speaker 1: part of the higher costs for next year. And Allison,
• 22:15
  Speaker 1: you know Wells Fargo. You know, they've always been such
• 22:17
  Speaker 1: a very strong consumer banking brand less so on the
• 22:21
  Speaker 1: corporate and investment banking side, they've made some recent comments
• 22:25
  Speaker 1: about ramping up their investment banking business. How is the
• 22:28
  Speaker 1: market perceiving that. I think that, um, you know, that's
• 22:33
  Speaker 1: been an area where I think investors over time have
• 22:37
  Speaker 1: thought about, you know that that could be an opportunity
• 22:40
  Speaker 1: for the bank. They did, you know, if you go
• 22:43
  Speaker 1: back very long term, you know when they bought Wakovia
• 22:46
  Speaker 1: sort of get a little bit bigger in that business. UM.
• 22:49
  Speaker 1: Their wealth management business is also something that's that's little
• 22:52
  Speaker 1: talked about, that's done well for them. However, asset management
• 22:55
  Speaker 1: is a bit a little bit UM subscale UM and
• 22:58
  Speaker 1: and that sort of versus some of the some of
• 23:00
  Speaker 1: the bigger competitors. So UM, it seems like there could
• 23:04
  Speaker 1: be some opportunity on the investment facing side, But keep
• 23:06
  Speaker 1: in mind that this is already an area that is
• 23:09
  Speaker 1: UM super competitive UM and so a lot of times
• 23:13
  Speaker 1: when banks talk about going into attractive areas UM that
• 23:18
  Speaker 1: it is a consideration in terms of who who is
• 23:21
  Speaker 1: already there. And if you look at UM again, JP Morgan,
• 23:26
  Speaker 1: we've talked about the virtuous spycle cycle of their tech
• 23:29
  Speaker 1: spending and they're going to be spending more and that
• 23:32
  Speaker 1: is really one of the areas that has helped them
• 23:34
  Speaker 1: to be UM successful in their business. And what we've
• 23:37
  Speaker 1: actually seen is the biggest company's consolidating share and so
• 23:43
  Speaker 1: UM you know, wells Fargo potentially getting more aggressive is
• 23:46
  Speaker 1: in contrast to some other UM folks leaving the business UM,
• 23:50
  Speaker 1: so we would want to hear more about how they're
• 23:52
  Speaker 1: going to differentiate. And Alison, before you have to go,
• 23:55
  Speaker 1: I do want to ask about the old enmity that's
• 23:57
  Speaker 1: coming back again at the City and you know it
• 24:00
  Speaker 1: was other banks at other periods, including Golden Sacks. The
• 24:04
  Speaker 1: folks trading spread products and other instruments managed to post
• 24:08
  Speaker 1: a fifty eight percent increase in those revenues and that
• 24:11
  Speaker 1: made up a little bit for the drop in revenue
• 24:13
  Speaker 1: that the firm's rates and currencies traders had. How will
• 24:17
  Speaker 1: that go down when it comes to bonus season? So
• 24:20
  Speaker 1: I think UM two things they're keep in mind that,
• 24:23
  Speaker 1: you know, when we look at these sort of year
• 24:25
  Speaker 1: over year comparisons, and it always depends on on what
• 24:28
  Speaker 1: was working in the prior year. And I would also
• 24:30
  Speaker 1: point out that the rates and currencies business was a
• 24:33
  Speaker 1: huge driver of a lot of the uplift that we
• 24:36
  Speaker 1: saw in the first half, So UM to some extent,
• 24:40
  Speaker 1: it is a little bit about comparisons, I think with
• 24:44
  Speaker 1: regarding with regard to bonuses UM. So Bloomberg News is
• 24:48
  Speaker 1: obviously reported on UM different policies across the banks. Obviously
• 24:52
  Speaker 1: the banks are UM, you know, vocal about considering all
• 24:56
  Speaker 1: stakeholders in terms of they want to pay for performance. Again,
• 25:00
  Speaker 1: we talked about the technology investment, but there's also a
• 25:02
  Speaker 1: level of talent investment if you want to be successful
• 25:05
  Speaker 1: in these businesses UM. But also balancing that with UM,
• 25:11
  Speaker 1: you know, concerns about what we're seeing in the economy.
• 25:13
  Speaker 1: We've also had some big banks take some big legal
• 25:16
  Speaker 1: hits UM, and so that's sort of a consideration, a
• 25:19
  Speaker 1: broader consideration. Alison Williams, thank you so much. We appreciate that.
• 25:23
  Speaker 1: Alison Williams, senior Banks analysts for Bloomberg Intelligence, giving us
• 25:28
  Speaker 1: some thoughts of big banks, uh turning really has time
• 25:32
  Speaker 1: for them to show and gets some mixed results today.
• 25:35
  Speaker 1: Sarah Ponzac, We've just in the least, you know, four
• 25:37
  Speaker 1: or five minutes, we've seen the markets really roll over here.
• 25:40
  Speaker 1: What's going on? Right? We really have It doesn't seem
• 25:42
  Speaker 1: like there's any true headlines that have come across the tape,
• 25:45
  Speaker 1: at least that I've seen so far, that have caused this.
• 25:47
  Speaker 1: But whatever cor i s identity be sure over there
• 25:50
  Speaker 1: is pointing out is the fact that all week long
• 25:52
  Speaker 1: it felt like there was this pent up nervous energy
• 25:55
  Speaker 1: almost and you saw it really asserting it itself in
• 25:59
  Speaker 1: different areas of the markets that we've discussed, that being
• 26:01
  Speaker 1: in penny stocks in different areas of the market, just
• 26:05
  Speaker 1: soaring left and right. And what he's saying is that
• 26:07
  Speaker 1: to him, it feels that institutional investors might not be
• 26:10
  Speaker 1: comfortable until some of the retail investors get cleaned out
• 26:13
  Speaker 1: and all of a sudden, we haven't seen a day
• 26:15
  Speaker 1: like this in quite a while. It feels like we're
• 26:16
  Speaker 1: really seeing this selling start to spiral. Now we see
• 26:19
  Speaker 1: the SMP down one percent, I'm looking at the NASDAC
• 26:22
  Speaker 1: down one percent as well, the Russell two thousand down
• 26:25
  Speaker 1: one point seven percent, and we really do see a
• 26:28
  Speaker 1: sputtering of this reflation trade. Energy. You're best performing sector
• 26:31
  Speaker 1: this year, Well, today it's your worst sector. After the
• 26:34
  Speaker 1: bank reports Financials down more than two percent, your second
• 26:36
  Speaker 1: worst sector today. Sarah, thank you so much for joining.
• 26:39
  Speaker 1: We appreciate that. Sarah Ponza, cross asset reporter for Bloomberg News,
• 26:42
  Speaker 1: and of course Alison Williams, Senior banks analysts for Bloomberg Intelligence.
• 26:46
  Speaker 1: Here markets selling off this morning, big banks reporting mixed numbers.
• 26:52
  Speaker 1: Thanks for listening to Bloomberg Markets podcast. You can subscribe
• 26:56
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• 26:59
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• 27:02
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• 27:04
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• 27:07
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