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U.S Retail Sales Beat Forecasts, Walmart Earnings · Bloomberg Intelligence

• 0:00
  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
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  Speaker 3: Alex st alongside Paul Sweeney. This is a Bloomberg Intelligence Radio.
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  Speaker 3: We are broadcasting to you live my interactive broker studio
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  Speaker 3: right here in Midtown Manhattan, Manhattan. Camon Christ Macroman writes
• 0:35
  Speaker 3: at Bloomberg like, if the economy is slowing down, someone
• 0:37
  Speaker 3: may want to tell the consumer, because really retail sales
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  Speaker 3: didn't point to that, So I thought that was quite
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  Speaker 3: a good point, and you look at equities just flying higher.
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  Speaker 3: Here joining us now is Mariy Shore, Senior Equity Analystic Columbia,
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  Speaker 3: Thread Needle Investments. Marie, what good news good news for stocks?
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  Speaker 3: Is that a fair statement? We get good news by
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  Speaker 3: the equity market.
• 1:01
  Speaker 1: Absolutely, yes. I think the results today show us that
• 1:04
  Speaker 1: the consumer is more stable versus what was feared. We
• 1:10
  Speaker 1: had heard more throughout the month of July that there
• 1:12
  Speaker 1: was a slow down happening, but in my view, the
• 1:15
  Speaker 1: consumer backdrop remained stable, and the different results that we
• 1:20
  Speaker 1: see between different retailers just shows you know who's gaining
• 1:25
  Speaker 1: share and who's losing share. But when I looked at
• 1:28
  Speaker 1: the trends today, I think although the high level retail
• 1:33
  Speaker 1: sales number was better than feared, I would say when
• 1:35
  Speaker 1: you dig a little deeper, the trends are still mixed.
• 1:38
  Speaker 1: On the one hand, we see the consumer still choiceful
• 1:42
  Speaker 1: in their spend, spending more on services over goods and
• 1:46
  Speaker 1: needs over ONTs. At the same time, within discretionary we
• 1:51
  Speaker 1: do see some signs of life in categories like apparel
• 1:55
  Speaker 1: and even electronics. So still a very mixed print, but
• 2:00
  Speaker 1: certainly better than feared.
• 2:03
  Speaker 4: Back to school holidays.
• 2:05
  Speaker 5: What are some of the retailers telling me about some
• 2:07
  Speaker 5: of the big events coming up here for the retail
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  Speaker 5: sales number?
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  Speaker 1: These events are very important because, as we've heard from
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  Speaker 1: every retailer for years now, the consumer is shopping very
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  Speaker 1: close to need.
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  Speaker 4: So you know the.
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  Speaker 1: Tone from Walmart in terms of the trends they saw
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  Speaker 1: ending the quarter and in August today, we're very positive
• 2:29
  Speaker 1: again they've seen very consistent results. I think the consumer
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  Speaker 1: will show up for back to school in the same
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  Speaker 1: way that they showed up for holiday, and again I
• 2:38
  Speaker 1: think we're seeing that in some of the data today
• 2:41
  Speaker 1: with the strength and electronics and even in apparel where
• 2:44
  Speaker 1: there are some new trends that are resonating now.
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  Speaker 3: So in the equity market, then, is it difficult to
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  Speaker 3: pick the winners and losers? Because it does feel like
• 2:55
  Speaker 3: it's hard to get a broad back or read like
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  Speaker 3: the data slowing. We know that check, check that Bucks,
• 3:00
  Speaker 3: but in terms of what they're buying, I would have
• 3:02
  Speaker 3: thought the tapestry would have struggled, right, I would say, Okay,
• 3:05
  Speaker 3: at some point the coach passing on price increases was
• 3:08
  Speaker 3: going to max out consumers. It doesn't look like that's
• 3:10
  Speaker 3: actually happening. How hard is it to do your job?
• 3:14
  Speaker 1: It has become more challenging, especially because the markets are
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  Speaker 1: so volatile right and head funds and macro funds are
• 3:22
  Speaker 1: just having such a large impact in how the stocks
• 3:25
  Speaker 1: are trading. But we are seeing a very clear difference
• 3:29
  Speaker 1: between shared gainers and losers at this point, and so
• 3:33
  Speaker 1: what we're really trying to do is focus on the
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  Speaker 1: companies that are gaining share where we see the potential
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  Speaker 1: for positives positive earnings revisions.
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  Speaker 4: The problem is a lot of those stocks.
• 3:45
  Speaker 1: Are screening is pretty expensive, you know, names like Walmart
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  Speaker 1: and Costco. On the other hand, there are names where
• 3:53
  Speaker 1: even with more modest revenue growth assumptions, there is a
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  Speaker 1: real margin in free cash flow growth story there. So
• 4:01
  Speaker 1: that is like the other group of stocks that we
• 4:04
  Speaker 1: are trying to focus on. But to your point, it's
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  Speaker 1: very hard to listen to what one company is saying
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  Speaker 1: and extrapolate that because it really feels like within a
• 4:16
  Speaker 1: kind of lackluster consumer or retail backdrop, there are still
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  Speaker 1: some companies like Walmart is a perfect example, that are
• 4:24
  Speaker 1: able to do very well right now, Hey.
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  Speaker 5: Mari, what kind of deals can I get if I
• 4:29
  Speaker 5: go shopping at there? How promotional are retailers out there?
• 4:33
  Speaker 1: You as for me?
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  Speaker 6: So sweet?
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  Speaker 4: Yeah?
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  Speaker 1: I think we talked about this last time. So since
• 4:40
  Speaker 1: the holiday season of twenty three, the retailers inventory levels
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  Speaker 1: have been much better positioned, not perfect, but much better positioned.
• 4:51
  Speaker 1: So while the retailers remain aggressive on promotions to drive traffic,
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  Speaker 1: you're not going to see the crazy promotions that they
• 5:00
  Speaker 1: had to run when they were heavy on inventory. And
• 5:03
  Speaker 1: we should also see fewer markdowns, which will be very
• 5:07
  Speaker 1: good for margin. But at the same time, everyone recognizes
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  Speaker 1: that the consumer is stretched, and I know both like
• 5:15
  Speaker 1: the consumer staples companies and a lot of the retailers
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  Speaker 1: and brands are talking about needing to promote to drive
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  Speaker 1: volume and traffic.
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  Speaker 3: I was reading an article the other day that retailers
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  Speaker 3: are already buying their inventory for the holiday, which totally
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  Speaker 3: makes sense. I mean, a lot of cargoes were coming
• 5:33
  Speaker 3: into ports, etc. How confident do you think retailers are
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  Speaker 3: in their inventory build up for the holiday?
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  Speaker 1: They seem pretty confident.
• 5:42
  Speaker 6: You know.
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  Speaker 1: What we've seen on the freight side is a recent
• 5:45
  Speaker 1: rise in ocean freight rate, So that's something we've been
• 5:48
  Speaker 1: talking to the retailers about. Right now, a lot of
• 5:50
  Speaker 1: them are locked into their contract rates, so it doesn't
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  Speaker 1: sound like that as a near term risk to margin,
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  Speaker 1: but definitely something we have to monitor for next year.
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  Speaker 4: There's also been some disruption in the Red Sea.
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  Speaker 1: We've heard about recent protests in Bangladesh, which could impact
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  Speaker 1: companies that are sourcing from there, But so far, in
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  Speaker 1: our conversations with retailers, it doesn't really feel like any
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  Speaker 1: of those things are going to result in any real
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  Speaker 1: near term disruption to the business, and it sounds like,
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  Speaker 1: you know, the outlook for a holiday in terms of
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  Speaker 1: getting the inventory that they want and need is pretty
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  Speaker 1: consistent and stable.
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  Speaker 5: And Mari, when I was looking at the Walmart numbers again,
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  Speaker 5: what jumps out of me is it does so many quarters?
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  Speaker 5: Is there e commerce up twenty two percent? Yes, boy,
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  Speaker 5: they've They're right there with Walmart, aren't they. They don't
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  Speaker 5: take it, I mean from with the Amazon. They don't
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  Speaker 5: take a step back from Amazon at all, do they?
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  Speaker 7: Right?
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  Speaker 4: No, absolutely not.
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  Speaker 1: I mean, remember, Amazon is still clearly the dominant player
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  Speaker 1: in this category. I mean, overall e commerce is about
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  Speaker 1: thirty percent of total retail sales, and Amazon is almost
• 7:02
  Speaker 1: half of that. So Amazon is obviously operating off a
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  Speaker 1: much larger base. Having said that, Walmart is now growing
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  Speaker 1: faster than Amazon. I think the only other company I
• 7:15
  Speaker 1: follow that is growing at a similar rate is actually Costo.
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  Speaker 1: And I think what's happening specifically in the case of
• 7:21
  Speaker 1: Walmart is a lot of their new initiatives, building out
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  Speaker 1: their marketplace, building out fulfillment, building out their membership model,
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  Speaker 1: building out advertising. All of those initiatives are finally coming
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  Speaker 1: together and really driving their e commerce business and So
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  Speaker 1: the thing that's so impressive about Walmart as we look
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  Speaker 1: at their results is it is very clear that they
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  Speaker 1: are gaining share across channel, across category, across income demographic,
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  Speaker 1: and that broad based strength I think will drive strengthen
• 7:55
  Speaker 1: their results for the foreseeable future.
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  Speaker 3: All right, make we appreciate that. Thank you so much.
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  Speaker 3: Mario Shore, Senior equity analyst over at Columbia Thread Needle Investments,
• 8:04
  Speaker 3: joining us from Boston, Massachusetts. And again, now I'm addicted
• 8:07
  Speaker 3: to this altd go scream and I'm looking at sort
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  Speaker 3: of the estimated sales we're looking at here, and they're
• 8:13
  Speaker 3: still beating competitors.
• 8:15
  Speaker 6: I know.
• 8:16
  Speaker 3: Anyway, altd Go really cool function on the termin You
• 8:19
  Speaker 3: should definitely check it out.
• 8:22
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• 8:40
  Speaker 5: Let's get back to the story of the retail. Is
• 8:43
  Speaker 5: today's the story about the consumer. We had retail sales
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  Speaker 5: coming a little bit better than expected. We had Walmart
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  Speaker 5: reports some numbers at the street like this SoC is up.
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  Speaker 5: So Jen Bartasha's storyin so she's bloomerg Intelligence retail analyst
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  Speaker 5: covering all the retail space, including Walmart. Hey, Jen, what
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  Speaker 5: did you take away from these Walmart numbers? The streets
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  Speaker 5: certainly like them?
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  Speaker 8: Yeah, Actually, Walmart had a great quarter. I think most
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  Speaker 8: people expected it because they do tend to do well
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  Speaker 8: when the consumer's under stress. But some of the things
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  Speaker 8: that were interesting takeaways were things like the amount of
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  Speaker 8: generative AI that they're using in their business to close
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  Speaker 8: the competitive gap to peers like Amazon, especially in e commerce,
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  Speaker 8: the idea that their growth is being led by volume,
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  Speaker 8: which is a very different story than we're hearing from
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  Speaker 8: most retailers. And finally, one of the other remarkable things
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  Speaker 8: is that they sort of issued a little bit of
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  Speaker 8: a warning shot to package food companies about still wanting
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  Speaker 8: to try to pass through price increases and that Walmart
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  Speaker 8: is really focused on bringing prices down instead.
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  Speaker 3: So does that bode well? So here's what I'm trying
• 9:46
  Speaker 3: to understand what the volume side. Does this mean that
• 9:48
  Speaker 3: this is good news for like a costco or Target?
• 9:51
  Speaker 3: Or is Walmart taking share from the likes of Target.
• 9:54
  Speaker 8: Well, I would say I would argue that Walmart is
• 9:56
  Speaker 8: probably taking some share and that they're translated that into
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  Speaker 8: volume gains because they're very focused on offering value, whether
• 10:05
  Speaker 8: it's from a price perspective or from a convenience perspective,
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  Speaker 8: and that seems to really be resonating with consumers. Right now.
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  Speaker 5: Are people coming down who maybe we're not Walmart shoppers,
• 10:17
  Speaker 5: but now they're coming to Walmart. Is Walmart seeing that
• 10:21
  Speaker 5: they are.
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  Speaker 8: They talked last quarter about bringing in hiringcome households, and
• 10:26
  Speaker 8: that trend seems to be continuing. You know, in the
• 10:29
  Speaker 8: last year and a half or so, Walmart has invested
• 10:32
  Speaker 8: in improving and renovating their stores, which is particularly important
• 10:37
  Speaker 8: for hiringcome households, because when you walk into a store
• 10:40
  Speaker 8: and it's kind of dingy or grungy, it doesn't make
• 10:43
  Speaker 8: for the best shopping experience. And so part of that
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  Speaker 8: investment is resonating with those hiring consumers. But also people
• 10:50
  Speaker 8: are becoming more practical about where they're seeking value. And
• 10:54
  Speaker 8: I think I've used this example before, but if you
• 10:56
  Speaker 8: can buy a box of cereal, which is a standard
• 10:58
  Speaker 8: box for you know, fifteen or twenty percent less at
• 11:02
  Speaker 8: Walmart than you can at your grocery store. Even that
• 11:05
  Speaker 8: speaks to hiringcome households that are looking to save a
• 11:08
  Speaker 8: little bit here and there as well.
• 11:10
  Speaker 3: Also just in comparison of just how expensive regular and
• 11:13
  Speaker 3: grocery stores have gotten to just in terms of that. Also,
• 11:16
  Speaker 3: what about their e commerce because basically another perk for
• 11:18
  Speaker 3: Walmart is there just basically like a giant warehouse.
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  Speaker 8: Also, yeah, I mean their e commerce operations are continuing
• 11:27
  Speaker 8: to grow. I think one of the things that that
• 11:30
  Speaker 8: investors are finding very encouraging is that the losses associated
• 11:34
  Speaker 8: with e commerce aren't narrowing. Originally, Walmart said that they
• 11:38
  Speaker 8: actually thought that it would generally be profitable in the
• 11:41
  Speaker 8: next year to year and a half. Now today Doug
• 11:44
  Speaker 8: McMillan kind of backed off and said, you know, don't
• 11:46
  Speaker 8: focus so much on just one metric, but that those
• 11:49
  Speaker 8: losses are easing and that really is a good indicator
• 11:54
  Speaker 8: for Walmart as well with regards to its overall profit
• 11:56
  Speaker 8: profile and where it's developing as a company.
• 12:00
  Speaker 5: We're it just wrote thirty seconds, where does growth come
• 12:02
  Speaker 5: from Walmart? Is it just a GDP top line story?
• 12:06
  Speaker 8: It is in part Paul. But at the same time,
• 12:10
  Speaker 8: they really are pulling more people into it. They're kind
• 12:12
  Speaker 8: of with their their overall ecosphere, and so it's also
• 12:16
  Speaker 8: through variety. So it's not just the store, it's you know,
• 12:18
  Speaker 8: an increasing marketplace where they're becoming more competitive with the
• 12:21
  Speaker 8: likes of Amazon. But it's also things like financial services
• 12:24
  Speaker 8: or vet services or things that they're exploring that help
• 12:27
  Speaker 8: bring people in for more than just shopping.
• 12:30
  Speaker 5: All right, that's I tell everybody My next gig is
• 12:33
  Speaker 5: I'm going to be a greeter at Walmart. I'm not kidding.
• 12:36
  Speaker 5: Jen Bartash, just thanks so much for joining.
• 12:38
  Speaker 3: That would be entertaining or weird.
• 12:40
  Speaker 5: That would be you would loved and you walked in
• 12:42
  Speaker 5: to see me. Wouldn't that be great?
• 12:44
  Speaker 3: I don't know how people were dressing walking into the
• 12:47
  Speaker 3: I'm really trying to absorb what this would look like.
• 12:49
  Speaker 5: I We're gonna have more coming up. That was Jen
• 12:51
  Speaker 5: Bartash's given us the latest on Walmart.
• 12:54
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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• 13:09
  Speaker 3: Alex Steel here alongside Paul Sweeney. This is Bloomberg Intelligence Radio,
• 13:13
  Speaker 3: where you bring you all the top news in business
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  Speaker 3: and economics and finance through our lens of our Bloomberg
• 13:17
  Speaker 3: Intelligence folks, because they cover two thousand companies and one
• 13:20
  Speaker 3: hundred and thirty industries worldwide. So back to that retail
• 13:23
  Speaker 3: sales data. Good news, good news. I guess you look
• 13:26
  Speaker 3: at the two year though bonds yields are up by
• 13:28
  Speaker 3: about twelve basis points, which is a head scratcher for
• 13:31
  Speaker 3: me because the news is good. So good news is
• 13:34
  Speaker 3: good news. That's at least what the equity market is saying.
• 13:36
  Speaker 3: But then the bond market, what is that telling me? Luckily,
• 13:38
  Speaker 3: we're going to talk to Vanir buan Shalli. He's founder
• 13:41
  Speaker 3: and chief investment officer of long Tail Alpha. Hey, Vanier,
• 13:44
  Speaker 3: are we looking at the bond and equity market telling
• 13:47
  Speaker 3: us the same thing about retail sales right now?
• 13:51
  Speaker 6: I think they're slightly different. I think this has been
• 13:52
  Speaker 6: a problem, not just this year, but for a couple
• 13:55
  Speaker 6: of years now. I think the equity markets are being
• 13:57
  Speaker 6: driven by a lot of cources externals, buybacks from large
• 14:01
  Speaker 6: corporations retail buying a lot of stock. The bond market
• 14:06
  Speaker 6: is not that convinced. I think the inverted youth curves,
• 14:10
  Speaker 6: certainly we can talk about it, is telling you a
• 14:12
  Speaker 6: very different story. I think long term meals are too
• 14:15
  Speaker 6: low here, which is part of the reason why retail
• 14:17
  Speaker 6: sales and the economy is strong and keeps getting stronger.
• 14:22
  Speaker 5: What do you make of a week ago Friday that
• 14:24
  Speaker 5: was a real shock to the marketplace and we see
• 14:27
  Speaker 5: it saw dislocations. I mean, we had the VIX, which
• 14:30
  Speaker 5: is now below fifteen was above sixty five. What do
• 14:32
  Speaker 5: you make of that training activity we saw a week
• 14:35
  Speaker 5: ago Friday even here?
• 14:37
  Speaker 6: Yeah, so you know I wrote about this last week.
• 14:39
  Speaker 6: What we've observed over the last few years is that
• 14:42
  Speaker 6: the intensity at which markets are selling off and the
• 14:45
  Speaker 6: big spikes is getting bigger and bigger. It happens over
• 14:48
  Speaker 6: a very short period of time. And you know, going
• 14:50
  Speaker 6: back town two thousand and eight, where he used to
• 14:53
  Speaker 6: take a months and quarters, now it's just taking weeks
• 14:56
  Speaker 6: and days and maybe hours. And last Monday was again
• 15:01
  Speaker 6: you couldn't have done anything except if you did something
• 15:04
  Speaker 6: in the pre market. You know, Nick was down twelve
• 15:06
  Speaker 6: percent we were up that night all night, and you know,
• 15:08
  Speaker 6: again it was just an air gap. There was absolutely
• 15:11
  Speaker 6: no liquidity. And I think that's just one of those
• 15:15
  Speaker 6: warning shots that tells you how lever the system is
• 15:18
  Speaker 6: and how ill liquid the system is. And I don't
• 15:21
  Speaker 6: think that was the end of it. I think even today,
• 15:24
  Speaker 6: the massive valley we're seeing is happening on extremely in
• 15:29
  Speaker 6: ill liquid conditions.
• 15:31
  Speaker 3: I thought positioning, though, if we just stick with the
• 15:32
  Speaker 3: mom market Verzayonna, I thought positioning was all cleaned out
• 15:34
  Speaker 3: now that after the turmoil last couple of weeks, now
• 15:37
  Speaker 3: you have a cleaner read. Is that not the case?
• 15:40
  Speaker 6: I don't think so. I think what happened was people
• 15:43
  Speaker 6: try to get out. I mean it's like a very
• 15:45
  Speaker 6: big elephant trying to get through, you know, the eye
• 15:47
  Speaker 6: of a needle. I think some people got out, maybe
• 15:50
  Speaker 6: in Tannic on Monday and Tuesday, and then a lot
• 15:53
  Speaker 6: of systematic strategies started to reverse as BIS dropped, Like
• 15:56
  Speaker 6: Paul just mentioned, from sixty five pre market to about
• 15:59
  Speaker 6: you know twenty, many systematic strategies that are index to
• 16:03
  Speaker 6: the volatility market have to re lever, and I think
• 16:06
  Speaker 6: that's what you're seeing today. Very ill liquid billions and
• 16:10
  Speaker 6: billions coming back into the market, and there's really very
• 16:13
  Speaker 6: little liquidity for them to buy the risk assets back.
• 16:17
  Speaker 5: Vinyar, What do you think our Federal Reserve is going
• 16:19
  Speaker 5: to do next month?
• 16:21
  Speaker 6: Well, I think they have to ease now that they've
• 16:23
  Speaker 6: conditioned the market, they have to ease, and I think,
• 16:25
  Speaker 6: you know, that could be a twenty five. I don't
• 16:28
  Speaker 6: think they're going to do fifty will be too aggressive.
• 16:30
  Speaker 6: My senses, they're going to do a hawkish ease. They'll
• 16:34
  Speaker 6: do twenty five, and like the ECB, they'll say we'll
• 16:37
  Speaker 6: wait and see what happens, which is exactly what they
• 16:40
  Speaker 6: should do at this stage. And I think, you know,
• 16:42
  Speaker 6: that could set the stage for the next round of
• 16:47
  Speaker 6: the carry trade unwined. I mean, it's trillions out there,
• 16:49
  Speaker 6: trillions that have been accumulated over yeah, I don't know,
• 16:53
  Speaker 6: two decades or so. Because US rates going down, Japanese
• 16:57
  Speaker 6: rates going up compresses the yield spread, meaning a stronger again,
• 17:02
  Speaker 6: which could generate the next round.
• 17:04
  Speaker 3: So you think that we'll see a hawkish ease in September.
• 17:07
  Speaker 3: But a hawk ish use doesn't seem to me. A
• 17:10
  Speaker 3: carry trade unwined, it would be more than more dubish
• 17:13
  Speaker 3: they are.
• 17:13
  Speaker 6: No, yeah, possibly, it depends on again the carry trade online.
• 17:18
  Speaker 2: Right.
• 17:19
  Speaker 6: The currency markets is driven by the short trade differential. Right,
• 17:22
  Speaker 6: So US rates come down twenty five basis points unless
• 17:25
  Speaker 6: the Japan has to raise another twenty five basis spin
• 17:28
  Speaker 6: that fifty basis points have a very significant magnifier effect
• 17:32
  Speaker 6: on things like the cost of carry and so on,
• 17:36
  Speaker 6: And I think that's what's going to drive things in
• 17:38
  Speaker 6: the short run. So when I say hawkish ease, I
• 17:41
  Speaker 6: mean they're going to ease, but then they're going to
• 17:44
  Speaker 6: try to manage expectations for rates, call it two years
• 17:48
  Speaker 6: out or five years out, that this is not the
• 17:52
  Speaker 6: beginning of ten ease cycle, which is typically what you know,
• 17:57
  Speaker 6: what happened, and most of the markets are going to try
• 17:59
  Speaker 6: to build in right away.
• 18:01
  Speaker 5: If you're in a fixed income space, where do you
• 18:03
  Speaker 5: see value here? Do you should I just stick with
• 18:06
  Speaker 5: my two year treasury north of four percent?
• 18:07
  Speaker 4: Here?
• 18:08
  Speaker 5: Should I take some credit risk?
• 18:10
  Speaker 8: No?
• 18:10
  Speaker 6: I like the two year note. I think, Paul, the
• 18:12
  Speaker 6: two year note and T bills. You know, just a
• 18:14
  Speaker 6: month ago the auction cleared at close to five percent.
• 18:17
  Speaker 6: So I think if you can get a four percent
• 18:21
  Speaker 6: yield on two year notes or five five uarter percent
• 18:24
  Speaker 6: on T bills without taking any risk, duration risk or
• 18:27
  Speaker 6: credit risk. I think that's a great place to be.
• 18:29
  Speaker 6: And I'm talking about credit. Yes, it could tighten, but
• 18:32
  Speaker 6: I mean it's trading at basically all time tights right now.
• 18:36
  Speaker 6: I mean investment great credit and highield credit. You really
• 18:40
  Speaker 6: have to bet that there is nothing on the horizon
• 18:44
  Speaker 6: that could upset the Apple card and I believe there's
• 18:46
  Speaker 6: a lot out there, so you have to be careful
• 18:49
  Speaker 6: right now.
• 18:49
  Speaker 3: Well, yeah, that was an interesting That's an interesting point
• 18:51
  Speaker 3: because when we saw the VIC spike, we didn't see
• 18:54
  Speaker 3: the blowout and credit spreads in a way that one
• 18:56
  Speaker 3: might have thought. Why do you think that was?
• 18:59
  Speaker 6: Yeah, I think the market was waiting, right. So we
• 19:01
  Speaker 6: were here early in the morning, you know, and we
• 19:04
  Speaker 6: were watching the VIX at sixty five and the futures.
• 19:06
  Speaker 6: The VIX future is only getting up to about thirty something,
• 19:09
  Speaker 6: and the credit market waits and sees right because the
• 19:11
  Speaker 6: credit you can think of it as a long term
• 19:14
  Speaker 6: put on the equity market, and the fact that the
• 19:17
  Speaker 6: vics came down was a breath of relief or the
• 19:20
  Speaker 6: credit markets. President did white out, and CD Express did
• 19:23
  Speaker 6: widen out about fifty seven or actually mid sixties from
• 19:27
  Speaker 6: fifty to fifty three the week prior. But then as
• 19:31
  Speaker 6: the VIX came down, people basically said, Okay, this vigpike
• 19:35
  Speaker 6: is not translating into long term equity volatility rise because
• 19:39
  Speaker 6: the VIC curve was inverted and so on, and credit
• 19:42
  Speaker 6: markets watched that pretty carefully, and basically that was the
• 19:45
  Speaker 6: reason for the credit markets to kind of settle down again.
• 19:49
  Speaker 6: If you believe like I do, that that was only
• 19:52
  Speaker 6: the first round, I do think you have to be
• 19:55
  Speaker 6: careful because the next time around, if there's a big
• 19:59
  Speaker 6: shock to the system, great spreads could widen then stay wide,
• 20:02
  Speaker 6: not even widen more.
• 20:04
  Speaker 5: Finear, how do you guys? Do you guys have exposure
• 20:07
  Speaker 5: to alternative investments? Is that part of your outlook?
• 20:11
  Speaker 6: So we're direct investors in the market, so we don't
• 20:13
  Speaker 6: allocate to other funds. Obviously we're creating, you know, all
• 20:16
  Speaker 6: the futures and options and so on for our investors.
• 20:19
  Speaker 6: But yes, we are looking at all the alternatives as
• 20:22
  Speaker 6: signals on what might be happening. So you have to
• 20:25
  Speaker 6: be pretty hooked onto what everybody else is doing.
• 20:27
  Speaker 3: In today's market, What do you think is going to
• 20:30
  Speaker 3: be the trade around the elections? Like, I get the FED,
• 20:32
  Speaker 3: we got to get through that, right, But there's got
• 20:35
  Speaker 3: to be some political and geopolitical risk hedging that we're
• 20:37
  Speaker 3: going to see crop up. How do you think about that,
• 20:40
  Speaker 3: particularly when it doesn't really matter who's going to be
• 20:42
  Speaker 3: in the White House in that it feels like deficits
• 20:44
  Speaker 3: are just gonna be blown out no matter what.
• 20:47
  Speaker 6: Yeah, I think the a lot of it is priced
• 20:49
  Speaker 6: in right. A couple of months ago when I was
• 20:52
  Speaker 6: talking with someone the colleagues at Boomberg, you know, my
• 20:55
  Speaker 6: view was that, you know, mister Trump was probably going
• 20:57
  Speaker 6: to win, was pretty much baked in, and then you know,
• 21:00
  Speaker 6: with everything that's transpired, it's very close raiseds. We know,
• 21:04
  Speaker 6: And one of the big shocks from the twenty sixteen
• 21:06
  Speaker 6: elections was that a the market got who was going
• 21:10
  Speaker 6: to win wrong until the Florida returns were coming in
• 21:13
  Speaker 6: and then second conditional on who won, the direction of
• 21:16
  Speaker 6: the market got completely wrong. You know, it sold off
• 21:18
  Speaker 6: limit down and then limit up. And I think that's
• 21:20
  Speaker 6: the possibility here. So the elections could be extremely volatile.
• 21:24
  Speaker 6: One is we don't really know who's going to win,
• 21:26
  Speaker 6: and secondly, we don't know conditional on who wins what
• 21:28
  Speaker 6: the market does. And I think that's the surprise that
• 21:31
  Speaker 6: you've got to be prepared for. And given that, we
• 21:35
  Speaker 6: believe there's a very good opportunity generally to be long volatility,
• 21:39
  Speaker 6: right because volatility vixes back to below sixteen fifteen almost
• 21:44
  Speaker 6: it's a great time to bet on the unpriced event
• 21:49
  Speaker 6: possibility of something that market is not discounting actually happening.
• 21:53
  Speaker 6: You know, one of them could be Kamala Harris wins
• 21:58
  Speaker 6: and instead of the market selling, oh, there's a massive
• 22:01
  Speaker 6: upside rally in the market because that's really not a
• 22:04
  Speaker 6: priced outcome in the market today.
• 22:07
  Speaker 3: All right, Vaniir, we really appreciate, thank you so much.
• 22:09
  Speaker 3: Really great to get that perspective, very helpful of Viner
• 22:12
  Speaker 3: buon Shali. He's joining us, founder and chief investment officer
• 22:15
  Speaker 3: of long Tail Alpha. Don't you kind of wish if
• 22:17
  Speaker 3: you're a market participant, you could like put in a
• 22:19
  Speaker 3: position and then like go away for eight months and
• 22:21
  Speaker 3: then come back and see if it made money.
• 22:23
  Speaker 4: What's called it?
• 22:24
  Speaker 5: You know, you know, again investing in the S and
• 22:26
  Speaker 5: P five hundred that's why you see those index ETFs. True,
• 22:30
  Speaker 5: we're just getting so much fun flows in there because
• 22:33
  Speaker 5: a lot of people are saying, you know, for most
• 22:35
  Speaker 5: of folks out there, just buy an ETF that mimix
• 22:38
  Speaker 5: the market and just go away. I mean, from a
• 22:40
  Speaker 5: cost perspective and a return perspective, probably a good strategy.
• 22:46
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 22:50
  Speaker 2: weekdays at ten am Eastern on applecard Play and Android
• 22:53
  Speaker 2: Outo with the Bloomberg Business app. You can also listen
• 22:56
  Speaker 2: live on Amazon Alexa from our flagship New York station,
• 23:00
  Speaker 2: Say Alexa playing Bloomberg eleven.
• 23:04
  Speaker 3: Let's go to Deer So I mentioned it. It's up
• 23:06
  Speaker 3: over six percent. It wound up cutting costs, but its
• 23:10
  Speaker 3: earning is also kind of less bad than feared. My
• 23:12
  Speaker 3: question though, always if you have corn like at four
• 23:14
  Speaker 3: dollars a bushel or under which, because conditions are so
• 23:17
  Speaker 3: good for corn right now, that's gonna be really tough
• 23:20
  Speaker 3: for farmers, and then how do they go buy all
• 23:22
  Speaker 3: the fancy equipment And.
• 23:23
  Speaker 5: You're right, you're right, I didn't look at corn bushel.
• 23:26
  Speaker 3: Yeah, And there was a great piece I forget where
• 23:28
  Speaker 3: I read it that talked about how it's actually technology
• 23:30
  Speaker 3: and innovation that's allowing American farmers to do so well
• 23:33
  Speaker 3: as in have so much crops, but then that hurts
• 23:37
  Speaker 3: on the price side. Very cyclical industry there. So Christopher
• 23:41
  Speaker 3: Chelino is Bloomberg Intelligence Senior US Machinery analyst, and he
• 23:44
  Speaker 3: joins us, now give us your take on deer.
• 23:47
  Speaker 9: Earnings, Alex. I mean, the results really weren't as bad
• 23:52
  Speaker 9: as many had feared going into the quarter, both from
• 23:55
  Speaker 9: a top line perspective, margins, earnings all kind of better
• 23:59
  Speaker 9: than what we had to expected in what is a
• 24:01
  Speaker 9: pretty challenging environment given the commodity price backdrop. I think
• 24:06
  Speaker 9: one thing to take away from the quarter is that,
• 24:08
  Speaker 9: you know, pricing really continues to be remarkably resilient. We
• 24:12
  Speaker 9: actually saw pricing accelerate here in the quarter in their
• 24:16
  Speaker 9: agg businesses, and then really they kept their twenty twenty
• 24:20
  Speaker 9: four guidance unchanged for the most part. After all, their
• 24:24
  Speaker 9: peers cut during the quarter. So while we're not quite
• 24:27
  Speaker 9: out of the woods yet and there's certainly more headwinds
• 24:30
  Speaker 9: from a demand perspective moving into twenty twenty five, I
• 24:34
  Speaker 9: think this probably just you know, alleviates some of the
• 24:36
  Speaker 9: concerns over a more severe down term in the near term.
• 24:39
  Speaker 5: You know, growing up in my lawnmowing days, I always
• 24:42
  Speaker 5: wanted a deer tractor, but my dad would never go
• 24:46
  Speaker 5: for it. So I had to push mow our lot
• 24:48
  Speaker 5: which is a little over an acre, I mean something
• 24:50
  Speaker 5: that was a lot, and I'm like, for three bucks
• 24:53
  Speaker 5: by the way, and I'm like, can you kick in
• 24:55
  Speaker 5: for a deer tractor? No, what's the thing now? I
• 24:58
  Speaker 5: got the vestmuscooter, so that's one of the is off
• 25:00
  Speaker 5: my bucket list, but not the deer tracktro I'm still
• 25:03
  Speaker 5: working on.
• 25:03
  Speaker 3: I feel like, what would you do with that?
• 25:06
  Speaker 5: Exactly? I have met it drive around town. So talk
• 25:10
  Speaker 5: to US Chris about what deer's saying about the the
• 25:14
  Speaker 5: US farmer, because it just feels like that's a deer
• 25:17
  Speaker 5: is a real proxy for the US farmer.
• 25:20
  Speaker 9: Yeah, and certainly nothing runs like a deer, Paul. Yeah,
• 25:23
  Speaker 9: the backdrop isn't really favorable for the farmer, at least
• 25:28
  Speaker 9: for the balance of this year and probably into next year.
• 25:32
  Speaker 9: You know, Commodity prices continue to be under significant pressure.
• 25:35
  Speaker 9: If you look at corn, soy wheat all down, you know,
• 25:38
  Speaker 9: fifteen twenty five percent plus year to date, farming come
• 25:42
  Speaker 9: is going to be down north of twenty five percent
• 25:44
  Speaker 9: this year. New and used inventories are still quite elevated.
• 25:50
  Speaker 9: We don't have these big pricing tailwinds that we had
• 25:53
  Speaker 9: over the last three years, so it's certainly a challenging market,
• 25:56
  Speaker 9: and input costs are relatively elevated, so farmer incomes are
• 26:00
  Speaker 9: going to be under pressure. Really, the focus with Deer
• 26:03
  Speaker 9: and really all oeams now is really to try to
• 26:06
  Speaker 9: kind of right size the inventory in the channel. Inventories
• 26:08
  Speaker 9: are too high, so there's gonna be a lot of
• 26:11
  Speaker 9: focus in on underproducing retail demand for the balance of
• 26:14
  Speaker 9: this year with the hopes of producing in line with
• 26:17
  Speaker 9: retail demand and then you know where the retail environment
• 26:22
  Speaker 9: shakes out for next year. It's still a little bit
• 26:25
  Speaker 9: up in the air, but certainly from a commodity price
• 26:27
  Speaker 9: perspective and a farm fundamental perspective, certainly no signs of
• 26:31
  Speaker 9: a bottom yet.
• 26:33
  Speaker 3: Well also I should point out too, and we say
• 26:34
  Speaker 3: like less bad than feared, like North American sales we're
• 26:36
  Speaker 3: still down about or lower by fifteen percent, and revenue
• 26:39
  Speaker 3: in South America down by fifteen to twenty percent. Do
• 26:42
  Speaker 3: we feel like this is definitely the trough though.
• 26:45
  Speaker 9: Yeah, I think it's it's a story of the nicest
• 26:48
  Speaker 9: house on a bad block, right. I mean, it's still
• 26:50
  Speaker 9: a pretty difficult environment and it's still pretty fluid. I
• 26:55
  Speaker 9: don't have a ton of sense if we have really
• 26:58
  Speaker 9: good visibility on a trough yet. I think that's what
• 27:00
  Speaker 9: investors are, you know, starting to co lesson around twenty
• 27:04
  Speaker 9: twenty five will be a trough earnings year, but it's
• 27:08
  Speaker 9: still kind of a little too early, I think to
• 27:10
  Speaker 9: draw any conclusions. I think we'll have a better idea
• 27:14
  Speaker 9: probably at the end of next quarter and how we
• 27:16
  Speaker 9: exit the year in terms of an inventory perspective, And
• 27:19
  Speaker 9: if they're able to kind of get through those inventory
• 27:22
  Speaker 9: cuts and we're kind of more aligned with the demand environment,
• 27:25
  Speaker 9: then I think it's even possible to see earnings growth
• 27:28
  Speaker 9: and margin expansion even if we're looking at a lower
• 27:31
  Speaker 9: or slightly lower retail environment.
• 27:34
  Speaker 5: Chris we heard from I guess Home Depot says some
• 27:36
  Speaker 5: of their customers were deferring big projects waiting for interest
• 27:40
  Speaker 5: rates to decline, and as Deer said, anything about that, like,
• 27:43
  Speaker 5: if I'm a farmer, do I say, man I'm need
• 27:45
  Speaker 5: the tractor this year. Maybe I'll wait next year when
• 27:47
  Speaker 5: maybe my financing rate will be a little bit lower.
• 27:51
  Speaker 9: You know, the large ag, the large professional farmer a
• 27:54
  Speaker 9: little less sensitive to the interest rate narrative. It certainly
• 27:58
  Speaker 9: has more of an impact on their molag and turf
• 28:00
  Speaker 9: business and utility customers. They are much more interest rates sensitive.
• 28:04
  Speaker 9: But that market has now been weak for multiple years,
• 28:07
  Speaker 9: so I think we're at a trough or coming into
• 28:09
  Speaker 9: a trough on that market. And then I think, you know,
• 28:12
  Speaker 9: some new information that we got this quarter is that
• 28:16
  Speaker 9: particularly on the construction side of the business. Now they
• 28:19
  Speaker 9: took down some of their numbers for the year, and
• 28:21
  Speaker 9: actually construction was one of the disappointments in the quarter
• 28:25
  Speaker 9: as some of the rental fleets and construction equipment customers
• 28:30
  Speaker 9: slowed some of their order velocity and they pulled back
• 28:33
  Speaker 9: on some of their capital spending. So and the higher
• 28:37
  Speaker 9: rates were a contributing factor to that. So I think
• 28:40
  Speaker 9: that's where you're seeing more of the impact less so
• 28:42
  Speaker 9: on the large professional farmer.
• 28:44
  Speaker 5: You know, I hired out of Global data at Bloomberg
• 28:48
  Speaker 5: Intelligence twelve thirteen years ago. I didn't know anything. Now
• 28:51
  Speaker 5: he's a rock Star, and he talks to people all
• 28:53
  Speaker 5: over the globe, talks to these companies. He knows what
• 28:55
  Speaker 5: he's talking about. Christ Gielino, one of the good ones
• 28:57
  Speaker 5: in Bloomerg Intelligence, covered some of those industrials off along
• 29:00
  Speaker 5: with Karen Ubelheart talking about deer some better than expected earnings.
• 29:05
  Speaker 2: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 29:09
  Speaker 2: weekdays at ten am Eastern on applecard Play and Android
• 29:12
  Speaker 2: Auto with the Bloomberg Business App. You can also listen
• 29:15
  Speaker 2: live on Amazon Alexa from our flagship New York station
• 29:19
  Speaker 2: Just Say Alexa playing Bloomberg eleven thirty.
• 29:24
  Speaker 5: Dalex Steel, Paul Sweeney live here in our Bloomberg Interactive
• 29:26
  Speaker 5: Broker Studio, streaming live on YouTube as wells ahead over
• 29:29
  Speaker 5: there and just check out Bloomberg Podcast, and that's where
• 29:33
  Speaker 5: you find is here. You know, thinking about where we
• 29:35
  Speaker 5: were a week ago Monday, the Vicks over sixty, big
• 29:39
  Speaker 5: sell off in the markets, it's almost like, please look
• 29:43
  Speaker 5: at the markets today. It's almost like it never happened.
• 29:46
  Speaker 5: Our earnings. That good is economic data? That good. Let's
• 29:49
  Speaker 5: chicken with a professional. David Kodlak, Founder, Chief executive Officer
• 29:53
  Speaker 5: and chief investment strategist. He kind of does everything there
• 29:55
  Speaker 5: at Mainstay Capital. He joins us from Troy, Michigan via zoom. David,
• 30:01
  Speaker 5: what do you make of a week ago Friday, what
• 30:04
  Speaker 5: we saw, particularly in the morning, to what we've seen
• 30:07
  Speaker 5: since then?
• 30:08
  Speaker 7: Right? Yeah, so we you know, we had that growth
• 30:10
  Speaker 7: scare because of an ism and poor ism and a
• 30:13
  Speaker 7: non farm payrolls number two weeks ago, and that was
• 30:17
  Speaker 7: aggravated by.
• 30:18
  Speaker 4: The yen carry trade issue. With a week ago.
• 30:23
  Speaker 7: With job as claims, we got a little bit of
• 30:26
  Speaker 7: help there, and of course the data today with retail sales,
• 30:29
  Speaker 7: jobs claims a little better than expected. But I think
• 30:33
  Speaker 7: look at the data yesterday or let's say Tuesday through today.
• 30:36
  Speaker 7: Tuesday we had PPI coming in well below expectations. Yesterday
• 30:43
  Speaker 7: we had CPI coming in slightly below expectations, Headline inflation
• 30:48
  Speaker 7: is below three percent for the first time in a
• 30:50
  Speaker 7: long while. And now today we have retail sales kind
• 30:54
  Speaker 7: of blowout number when we're expecting four tenths and get
• 30:57
  Speaker 7: one percent, which says the consumer is still strong. You know,
• 31:01
  Speaker 7: if I'm going to loosely borrow a Mark Twain quote,
• 31:05
  Speaker 7: reports of the consumer's demise have been greatly exaggerated. We
• 31:09
  Speaker 7: need the consumer to stay strong. It's two thirds of
• 31:11
  Speaker 7: our economy. They were certainly strong last month.
• 31:15
  Speaker 4: So look what we have. We have growth with lowering inflation.
• 31:20
  Speaker 7: I don't want to overstate it that it's a Goldilock's
• 31:23
  Speaker 7: economy because we do have a real fear of recession.
• 31:26
  Speaker 4: We need the FED to get started on.
• 31:29
  Speaker 7: Their easing cycle and I think it'll be twenty five
• 31:32
  Speaker 7: basis points at not fifty in September that many are predicting.
• 31:36
  Speaker 7: But they need to get going and they have the
• 31:39
  Speaker 7: room to do it. We're on a good glide path
• 31:40
  Speaker 7: on inflation. And you know, when we have growth with
• 31:45
  Speaker 7: inflation inflation slowing.
• 31:48
  Speaker 4: That's a pretty good scenario for the economy.
• 31:50
  Speaker 3: Why are rates up then right now? In that scenario
• 31:54
  Speaker 3: just lined up?
• 31:55
  Speaker 7: Yeah, Well, rates are up today because the retail sales
• 31:59
  Speaker 7: number came in so strong, right, more than double expectations,
• 32:04
  Speaker 7: and you know kind of you know the growth scare
• 32:06
  Speaker 7: of two weeks ago.
• 32:08
  Speaker 4: It's it's really been a significant change, you.
• 32:10
  Speaker 7: Know, the Harrison that Paul was talking about from two
• 32:14
  Speaker 7: weeks ago to so alex we've really seen you know,
• 32:19
  Speaker 7: a terrific number that tells us the consumer is still
• 32:22
  Speaker 7: out there buying, and that's all important, right for the
• 32:25
  Speaker 7: US economy, The consumer is all important. It's two thirds
• 32:28
  Speaker 7: of consumers, two thirds of our economy, and that was
• 32:30
  Speaker 7: a very reassuring data point. But it means the economy
• 32:34
  Speaker 7: is a little bit stronger than we thought. Bond yields
• 32:37
  Speaker 7: go up five or seven or nine basis points.
• 32:41
  Speaker 5: So what type of stocks, what type of sectors work
• 32:45
  Speaker 5: in an environment David, where you know the economy is
• 32:48
  Speaker 5: hanging in there, maybe slow, but hanging in there, but
• 32:50
  Speaker 5: we now have the prospect for lower rates. What kind
• 32:53
  Speaker 5: of sectors screen well for you guys.
• 32:55
  Speaker 7: Yeah, So, first of all, you know, we we liked
• 32:59
  Speaker 7: the secular growth stories like megacap tech for a long time,
• 33:03
  Speaker 7: and we still believe in the AI plays, but now
• 33:06
  Speaker 7: we can look at cyclical plays. Take financials you know
• 33:10
  Speaker 7: that have struggled so much.
• 33:11
  Speaker 4: Over the past years.
• 33:12
  Speaker 7: Now, you know, we actually had the yield curve uninvert
• 33:17
  Speaker 7: briefly last week. We're but we're certainly seeing a steepening
• 33:23
  Speaker 7: of the curve, and as the FED starts to cut rates,
• 33:26
  Speaker 7: we'll see that steepening of the curve, which will be
• 33:28
  Speaker 7: good for financial is because nim nedis interest margin improof,
• 33:32
  Speaker 7: so we like financials or an extending bond duration. We
• 33:36
  Speaker 7: had for a over a year and probably fifteen months
• 33:40
  Speaker 7: had been an ultra short term bonds because we just
• 33:42
  Speaker 7: wanted to capture the yield and we didn't want the.
• 33:44
  Speaker 4: Interestraight rest and that was a good play.
• 33:46
  Speaker 7: But now it's time to be extending duration because we
• 33:51
  Speaker 7: know the FED is going to be cutting. Forecasts are
• 33:53
  Speaker 7: still about one hundred basis points by the end of
• 33:56
  Speaker 7: the year. That's you know, with that easing in place,
• 34:00
  Speaker 7: that means we want to lock in rates and extended duration,
• 34:05
  Speaker 7: and we also are broadening. It gives us an opportunity
• 34:10
  Speaker 7: to broaden portfolios into small caps, value cyclicals, mid caps,
• 34:14
  Speaker 7: you know, areas that we had been mostly vuoid in
• 34:16
  Speaker 7: favor of large cap and large cab megatach.
• 34:20
  Speaker 3: But what about the idea that with small caps the
• 34:24
  Speaker 3: pe ratio, so the P part wound up rerating enough
• 34:28
  Speaker 3: that okay, maybe you want to buy it, but maybe
• 34:30
  Speaker 3: that thesis is out the door of it because small
• 34:32
  Speaker 3: caps did have a run before the growth scare, but
• 34:34
  Speaker 3: that the E part isn't really holding up. That's what
• 34:37
  Speaker 3: I hear a lot about the small caps and these airs.
• 34:40
  Speaker 4: Yeah, forty two percent of the small cap stocks in
• 34:44
  Speaker 4: the Russell two thousand aren't profitable. You know, it's it's
• 34:48
  Speaker 4: a struggle.
• 34:49
  Speaker 7: You know, if a small cap stock does well, it
• 34:52
  Speaker 7: grows into the MidCap region, it leaves the Russell two thousand.
• 34:56
  Speaker 7: So what Here's what needs to happen for small caps,
• 34:59
  Speaker 7: is we really ne what's coming. The rate cuts that
• 35:03
  Speaker 7: are coming avoid a recession. And the PE multiple of
• 35:08
  Speaker 7: small caps is so attractive compared to large caps at
• 35:12
  Speaker 7: this point. You know, we were hitting earlier in the
• 35:15
  Speaker 7: year historical highs multi year delta of PE of large
• 35:20
  Speaker 7: caps versus versus small caps. So the attractiveness is there,
• 35:24
  Speaker 7: but we need the right kind of environment data like today.
• 35:27
  Speaker 7: We've seen what the Russell two thousand did today in
• 35:31
  Speaker 7: early training, up over two percent. And if we get
• 35:34
  Speaker 7: the rate cuts, the economy can can be slowing a bit.
• 35:39
  Speaker 4: But no recession. That's a that's a good environment for
• 35:42
  Speaker 4: small caps, for value, for cyclicals.
• 35:46
  Speaker 5: Do you think the FED is going to go twenty
• 35:47
  Speaker 5: five or fifty basis points? And do you even care?
• 35:52
  Speaker 7: The first of all, that's you know, that's a good way,
• 35:55
  Speaker 7: that's a good way to ask that question do we
• 35:57
  Speaker 7: even care? The most important thing is is they get started.
• 36:01
  Speaker 7: The first cut means they switched from a neutral stance
• 36:05
  Speaker 7: to an easing bias, right from neutral to easing. So
• 36:09
  Speaker 7: the first cut is symbolic in that regard if we
• 36:13
  Speaker 7: I think.
• 36:14
  Speaker 4: That they will go twenty five basis points, because.
• 36:16
  Speaker 7: If they go fifty, and I know what the case
• 36:19
  Speaker 7: is for that, for the case that others are making.
• 36:22
  Speaker 4: But then it raises a question, are they are they
• 36:25
  Speaker 4: doing fifty because they're behind. I mean, they've still got
• 36:28
  Speaker 4: November de Son, They've still.
• 36:29
  Speaker 7: Got more meetings to achieve seventy five hundred basis points
• 36:34
  Speaker 7: by the end of the year, maybe even do a
• 36:36
  Speaker 7: half cut later. I just wouldn't start there again for
• 36:40
  Speaker 7: symbolic reason. So I think they do twenty five. But
• 36:43
  Speaker 7: you know the part about do we even care? The
• 36:45
  Speaker 7: main point is is they get started. Let's get let's
• 36:48
  Speaker 7: get going, fad, Let's get the first cut in there
• 36:52
  Speaker 7: and established where you have changed your bias to an
• 36:55
  Speaker 7: easing cycle.
• 36:56
  Speaker 3: But to that point, you know something that I feel
• 36:57
  Speaker 3: like is becoming more of the conversation. I think it
• 37:00
  Speaker 3: was Bostic that mentioned this when he was speaking to
• 37:02
  Speaker 3: the ft is that you had a delayed reaction and
• 37:06
  Speaker 3: transmission mechanism of policy on the way up with rate,
• 37:09
  Speaker 3: So why not expect that then on the way down,
• 37:12
  Speaker 3: which implies that we do need to see sort of
• 37:14
  Speaker 3: a little faster, more aggressive cut so it filters through
• 37:17
  Speaker 3: the economy a little faster. What do you think about
• 37:19
  Speaker 3: that part?
• 37:20
  Speaker 4: I think that's actually it's absolutely right.
• 37:24
  Speaker 7: I mean, when we talk about FED policy and the
• 37:27
  Speaker 7: mistakes they've made, they made the mistake of twenty twenty
• 37:30
  Speaker 7: one of staying easy for too long, continuing to buy
• 37:34
  Speaker 7: mortgage backed securities, making mortgages so attractive people saw their
• 37:39
  Speaker 7: house price one and a half times are double in
• 37:43
  Speaker 7: a couple of years, and they created they helped create
• 37:47
  Speaker 7: the problem of inflation with the first policy here by
• 37:50
  Speaker 7: staying easy for too long. And they probably are going
• 37:53
  Speaker 7: and when we look back, they probably will have stayed
• 37:56
  Speaker 7: tight for too long. Five and a quarter is a
• 37:59
  Speaker 7: restrictive policy. See inflation is on a glide path to
• 38:02
  Speaker 7: their target. It's time to get on with cutting rates.
• 38:06
  Speaker 7: Probably should have.
• 38:06
  Speaker 4: Cut twenty five in hindsight, you know.
• 38:08
  Speaker 7: They probably should have cut twenty five in July and
• 38:12
  Speaker 7: then they'd be ready for another twenty five in September.
• 38:15
  Speaker 7: And that's what might beg the question they need to
• 38:17
  Speaker 7: do fifty to get caught up. But yeah, our concern
• 38:20
  Speaker 7: is they made the same mistake on easing as they
• 38:24
  Speaker 7: did as they did on or easing now as they
• 38:30
  Speaker 7: did on. They were easy for too long, went way
• 38:34
  Speaker 7: up to it, you know, drove it up to illustracted policy,
• 38:36
  Speaker 7: and now they got to get on with it, all right.
• 38:38
  Speaker 5: David, thank you so much for joining us. Always appreciate
• 38:40
  Speaker 5: getting your views. David Coodley's a founder of mainstay at
• 38:43
  Speaker 5: Capital Management, joining us from Tory, Michigan via zoom.
• 38:46
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