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Stocks Gain on U.S. Tax Plan; Bitcoin Rallies · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Bramowitz. Each day we
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. Just
• 0:34
  Speaker 1: how at risk are you of having a flood? Well?
• 0:38
  Speaker 1: When it came to Hurricane Harvey, about forty percent of
• 0:41
  Speaker 1: the people who suffered damages of homeowners were outside of
• 0:45
  Speaker 1: the flood zone and did not have insurance through the
• 0:49
  Speaker 1: National Flood Insurance Program. Here to talk about how to
• 0:53
  Speaker 1: assess your risk of flooding and why it is important
• 0:56
  Speaker 1: to consider private insurance is Mark Aunky Larry uh CEO
• 0:59
  Speaker 1: of Various Analytics and I enjoy us here in our
• 1:02
  Speaker 1: Bloombrick eleven three our studios. So, first of all, what
• 1:04
  Speaker 1: is Various Analytics. Well, Various Canalytics has some great data
• 1:08
  Speaker 1: which provides our customers, insurers, natural resources area as well
• 1:13
  Speaker 1: as financial services with great insights into the risk and
• 1:16
  Speaker 1: about the decisions they need to make. So how do
• 1:18
  Speaker 1: people determine truly their risk if they are not in
• 1:21
  Speaker 1: a flood zone and they are not on the coasts.
• 1:25
  Speaker 1: I mean, what goes into that? Sure? Well, I mean
• 1:27
  Speaker 1: the first thing you have to understand is long ago
• 1:30
  Speaker 1: the hundred year plane is really about lenders. Lenders want
• 1:34
  Speaker 1: to make sure that their assets, the mortgage that they're
• 1:36
  Speaker 1: putting on a home, had insurance. So over the course
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  Speaker 1: of time, Um, there is a lot of floodplane prone
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  Speaker 1: areas that aren't covered by those maps. So you're at
• 1:46
  Speaker 1: risk well outside those maps. And the fact you just
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  Speaker 1: provided inside of Harvey of the loss was outside of
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  Speaker 1: those traditional floodplanes. So risk is much bigger and much expected.
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  Speaker 1: A lot of consumers have no idea, and at the
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  Speaker 1: same time, the actual boundaries of flood are extending every day.
• 2:06
  Speaker 1: So I just have to wonder, when you start to
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  Speaker 1: do analytics on this kind of thing, what are you
• 2:12
  Speaker 1: looking for? Are you looking for the elevation, the whether
• 2:18
  Speaker 1: they're hills, whether it's just a flat plane, whether it's
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  Speaker 1: covered in concrete, the soil. I mean, what do you
• 2:23
  Speaker 1: look for? So great, great opening almost all those So
• 2:26
  Speaker 1: there's a lot of very advanced models that take a
• 2:28
  Speaker 1: look at all that. So if you price or understanding
• 2:30
  Speaker 1: homeowner's insurance policy. A lot of those perils are all
• 2:34
  Speaker 1: captured in that. So the models are very effective and
• 2:37
  Speaker 1: understanding both the floodplains. But what they do is they
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  Speaker 1: go beyond to understand how rising water will effect an area,
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  Speaker 1: whether it's paved or not paved. An example, distance to coast,
• 2:47
  Speaker 1: distance to you know, the various natural tributaries, tributaries. The
• 2:52
  Speaker 1: elements of risk are beyond just what has been a
• 2:55
  Speaker 1: UH map that's been around for a long time that
• 2:58
  Speaker 1: has been kind of altered for different legislative problems and issues.
• 3:02
  Speaker 1: So how who pays you? I mean do insurance companies basically,
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  Speaker 1: So it's basically the insurers who are looking to write
• 3:08
  Speaker 1: those risks. So I think there's a great opportunity to
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  Speaker 1: take some of what is you know, the flood insurance
• 3:14
  Speaker 1: and bring it to the private market so insurers can
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  Speaker 1: provide that to consumers. And I think that's a very
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  Speaker 1: viable and opportunity. I don't really see how they could
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  Speaker 1: do that if they could compete with the National Flood
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  Speaker 1: Insurance Program of the U S which is set to
• 3:28
  Speaker 1: expire later this year. But I'm sure we'll get pasted
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  Speaker 1: again because politically it would be unviable for them to
• 3:33
  Speaker 1: say to all the people on the coast of Florida
• 3:35
  Speaker 1: and North Carolina, well, go go fish, go go figure
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  Speaker 1: it out for yourselves, and we're not going to insure
• 3:41
  Speaker 1: you anymore. Um. But a lot of people have said
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  Speaker 1: that that's not an economically viable program, that there will
• 3:47
  Speaker 1: be much bigger losses than the income that they bring in.
• 3:50
  Speaker 1: So any private insurance policy would be vastly more expensive. No,
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  Speaker 1: So I think the answer is not necessarily to replace
• 3:58
  Speaker 1: uh the n f I paper. I think that needs
• 4:00
  Speaker 1: to continue. I'm not going to get into the politics
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  Speaker 1: of that, but the reality is there should it needs
• 4:06
  Speaker 1: to be private insurance to augment it, to provide insurance
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  Speaker 1: to those who are in a floodplaine that have risk. Um.
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  Speaker 1: I think what we are looking to do is try
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  Speaker 1: to provide the same type of options and flexibility that
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  Speaker 1: are available from a homeowner's perspective, trying to provide things
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  Speaker 1: that's affordable and available from a private perspective outside those
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  Speaker 1: flood zones. And I think, you know, you need to
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  Speaker 1: actually have some actual sound rating information so that the
• 4:28
  Speaker 1: pricing is accurate. Your point is valid there, it's been
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  Speaker 1: a little bit subsidized, a little bit subsidized. It's a
• 4:34
  Speaker 1: very very diplomatic way of putting it, compared to some
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  Speaker 1: of the language I've heard from other people. Uh, just
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  Speaker 1: can you give us a sense of which insurance companies
• 4:42
  Speaker 1: are interested in underwriting this type of policy. So right now,
• 4:46
  Speaker 1: there's a group of very large insurers they're called write
• 4:48
  Speaker 1: your own um. Historically they have been kind of focused
• 4:51
  Speaker 1: on providing is a distribution channel to the n f
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  Speaker 1: I pay um. I think under some of the more
• 4:57
  Speaker 1: recent legislation, they will now be allowed to both uh
• 5:00
  Speaker 1: distribute the n f I P insurance as well as
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  Speaker 1: write your own I think many sharers, both on the
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  Speaker 1: commercial and personal lines will write the program to get
• 5:09
  Speaker 1: the proper pricing and rates. And I'm sure that it's
• 5:13
  Speaker 1: not too hard to find investors who want to put
• 5:15
  Speaker 1: up the capital on the other side, because everyone's looking
• 5:17
  Speaker 1: for yields, and you can probably get a good yield
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  Speaker 1: for this, right I would agree what kind of yields
• 5:21
  Speaker 1: are looking at? Well, I think you'd see that from
• 5:23
  Speaker 1: an insurance perspective, r O s IF in the industry
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  Speaker 1: have historically been around seven percent, So I think most
• 5:28
  Speaker 1: people who are kind of coming in from an alternative
• 5:30
  Speaker 1: capital are going to look something that would be low
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  Speaker 1: sick double digits. All right, thank you so much, low
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  Speaker 1: double digits eleven twelve. In a time like this of
• 5:41
  Speaker 1: nine point seven trillion dollars of negative yielding debt, I'm
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  Speaker 1: sure they could find some some takers for that mark.
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  Speaker 1: Uncle Larry, thank you so much for joining us chief
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  Speaker 1: operating Officer of various Analytics, which takes a look at
• 5:51
  Speaker 1: the risks that are implied when people take out flood insurance. Uh.
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  Speaker 1: Of course, if you want to know the truth. I
• 5:58
  Speaker 1: actually bought my apartments specifically because it was an elevation
• 6:02
  Speaker 1: that would not get flooded. But now I'm going to
• 6:04
  Speaker 1: have to go back and this will be another thing
• 6:06
  Speaker 1: that I can worry about later to late at night
• 6:07
  Speaker 1: when I don't have anything else to worry about. Semi
• 6:26
  Speaker 1: followed Cebo opening up for bitcoin futures trading last night,
• 6:31
  Speaker 1: and the results have been pretty good. They have not
• 6:34
  Speaker 1: seen major hiccups, they have seen the trading volumes that
• 6:38
  Speaker 1: they have been good. All systems seem ago here to
• 6:43
  Speaker 1: put this into perspective and figure out whether this paves
• 6:46
  Speaker 1: the path for more institutional money flying into this cryptocurrency
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  Speaker 1: as Ken Fisher, Founder, chairman and co chief investment officer
• 6:55
  Speaker 1: of Fisher Investments. Ken, thank you so much for joining us.
• 6:59
  Speaker 1: I want to start with I want to start with
• 7:02
  Speaker 1: bitcoin because it seems to be the rage right now,
• 7:06
  Speaker 1: and because it's sort of highlights the degree of desire
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  Speaker 1: for volatility and bigger profits than you can get elsewhere.
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  Speaker 1: What's your take on it? Are you investing in it?
• 7:18
  Speaker 1: Are you staying away from it? Do you see it
• 7:20
  Speaker 1: as a sign of a bubble? Uh? So I've got
• 7:24
  Speaker 1: to take on it that I haven't had until last week,
• 7:29
  Speaker 1: which is last week. I'm in Manhattan, and I'm appearing
• 7:33
  Speaker 1: in various places, and I'm commenting on bitcoin, and I
• 7:37
  Speaker 1: was routinely in print, taken out of context and misinterpreted
• 7:42
  Speaker 1: in almost everything that I said by people who seem
• 7:46
  Speaker 1: to have some other goal. And I've never seen that
• 7:49
  Speaker 1: happen before. So I've made a conscious decision as of
• 7:52
  Speaker 1: last week, I'm not talking about bitcoin ever or crypto ever,
• 7:55
  Speaker 1: because it's a crazy world. People just cannot keep themselves
• 7:59
  Speaker 1: to the facts. The things that I said, which was
• 8:01
  Speaker 1: all actually on TV, are clear because there's a clear
• 8:07
  Speaker 1: record off I didn't do any other interviews, and there's
• 8:08
  Speaker 1: all these other things that appeared online in print saying
• 8:11
  Speaker 1: things that I said, things that I never said. I
• 8:13
  Speaker 1: think that's crazy, and I think that's an awful lot
• 8:15
  Speaker 1: of what goes on with the rest of bitcoin. Oh.
• 8:20
  Speaker 1: You know, I'm to go back that stuff on CNBC
• 8:23
  Speaker 1: and on the street dot com. And you know, basically
• 8:26
  Speaker 1: all that I said was I don't know if the
• 8:27
  Speaker 1: bubble or not. I hate that term bubble, but the
• 8:31
  Speaker 1: price movement in trading days before and after where we
• 8:35
  Speaker 1: are as of last week is in percentage magnitude bigger
• 8:39
  Speaker 1: than any of the bubbles of history. That doesn't make
• 8:43
  Speaker 1: it a bubble. It just makes it a big price movement. Uh.
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  Speaker 1: The other thing that I've said and that I'll say
• 8:47
  Speaker 1: about bitcoin is it in every long bull cycle, there
• 8:51
  Speaker 1: is some non stock market phenomena or close to stock
• 8:56
  Speaker 1: market phenomena that gives you a kind of a you
• 9:00
  Speaker 1: into a kind of a window pane into the coming
• 9:03
  Speaker 1: euphoria stocks. Coming back to John Templeton's line, the bull
• 9:07
  Speaker 1: markets are born on pessimism, growing skepticism, ature on optimism,
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  Speaker 1: and die of euphoria, and that euphoria, which is normally
• 9:15
  Speaker 1: the end of a bull market unless something governmental comes
• 9:18
  Speaker 1: along and noxious under first is something it's always not
• 9:22
  Speaker 1: clear fully that we're going to get to. But I
• 9:24
  Speaker 1: think the crypto thing is the first real sign we're
• 9:28
  Speaker 1: seeing in this long cycle of the coming of euphoria.
• 9:32
  Speaker 1: It's the window pane into the coming of euphoria for stocks.
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  Speaker 1: So what are you looking for to determine whether that
• 9:39
  Speaker 1: euphoria has started to bleed over? I mean, how do
• 9:41
  Speaker 1: you know that we aren't there yet? Oh, that's easy,
• 9:45
  Speaker 1: that's trivial. Look at all of the nonsense that people
• 9:48
  Speaker 1: worry about that they stop worrying about when you get
• 9:51
  Speaker 1: to euphoria. I mean, I've been doing this stuff, you know,
• 9:54
  Speaker 1: since the early seventies. And when you get to euphoria,
• 9:57
  Speaker 1: people stop worrying about things like are there too many
• 10:00
  Speaker 1: new highs? Uh? They stop worrying about things like as
• 10:03
  Speaker 1: the markets pe two high, they stop worrying about all
• 10:07
  Speaker 1: of the kinds of things like uh, the next said hike.
• 10:11
  Speaker 1: Because you actually get to that point when there's euphoria
• 10:14
  Speaker 1: where they invert the yel curve and nobody much pays
• 10:16
  Speaker 1: attention or notices because they conclude that it doesn't matter.
• 10:19
  Speaker 1: It's the worrying stopping about the things that people have
• 10:24
  Speaker 1: worried about over and over and over again wrongly, which
• 10:28
  Speaker 1: ironically is about the time to get worried. But we
• 10:31
  Speaker 1: still have those things. We still have people that have
• 10:33
  Speaker 1: a fear of heights, that think the market has been
• 10:36
  Speaker 1: too strong, particularly in America. That's true more so than
• 10:40
  Speaker 1: overseas because of the UH you know, if you look
• 10:43
  Speaker 1: overseas Britain, some continental Europe, more the equity returns have
• 10:48
  Speaker 1: been muted by currency strength, and so there's has been
• 10:52
  Speaker 1: so buoyant normally in the late stages of bowl markets.
• 10:55
  Speaker 1: As you move into that eusphoria phase, you get some
• 10:58
  Speaker 1: multiple big years this cycle, and we haven't really had
• 11:02
  Speaker 1: that normally. The first third of time of a ballmark
• 11:05
  Speaker 1: it's pretty steep, the middle thirds flatish in the back
• 11:08
  Speaker 1: their steep and of the return comes in the first
• 11:11
  Speaker 1: and last the ball market only about the middle third.
• 11:15
  Speaker 1: Before I came on, there was a comment that we've
• 11:17
  Speaker 1: had the most new high since nineteen which is true, um,
• 11:22
  Speaker 1: but also people forget that NT was at seven percent
• 11:27
  Speaker 1: year and still had years ahead of it in the
• 11:30
  Speaker 1: ball market. Uh, an interesting point that I think people
• 11:33
  Speaker 1: kind of miss in context. We still have a long
• 11:36
  Speaker 1: ways to go unless the government does something stupid, which
• 11:40
  Speaker 1: is so possible. Well, so if that's the case, it
• 11:43
  Speaker 1: sounds like, are you getting more heavily invested in risk
• 11:47
  Speaker 1: your stocks? I mean, is this time the time to
• 11:49
  Speaker 1: go all in if we still have the last third
• 11:51
  Speaker 1: of games to go? The time to get all in
• 11:55
  Speaker 1: was two thousand and nine, and I've been nearly endlessly bullish,
• 12:00
  Speaker 1: but not in what you think of as risk gier stocks.
• 12:03
  Speaker 1: In the back third of the time of the ball market,
• 12:05
  Speaker 1: the categories of stocks that typically do best are not
• 12:08
  Speaker 1: the ones that people think they will, because the market
• 12:11
  Speaker 1: is a function that works off surprise. The things that
• 12:15
  Speaker 1: do best in the last stage of a ball market
• 12:17
  Speaker 1: are categorically what you could call comfort stocks. They're big,
• 12:22
  Speaker 1: they're reputationally impeccable. There are things that are not thought
• 12:27
  Speaker 1: of as needles in the haystack, but as too obvious
• 12:31
  Speaker 1: to likely do well. They're perfectly the stocks that the
• 12:34
  Speaker 1: last greater fool who gets into the market that was
• 12:37
  Speaker 1: too afraid to buy a single thing one week before
• 12:40
  Speaker 1: is ready to dip his toe into because their comfort stocks.
• 12:44
  Speaker 1: So this would be big, global, high quality, well branded names.
• 12:50
  Speaker 1: This is why the Fangs are doing so well. Uh.
• 12:53
  Speaker 1: It's classically big pharma for the same reason. The person
• 12:58
  Speaker 1: with money, who is typically older, buys the drugs, knows
• 13:03
  Speaker 1: his friends would buy the drugs. Big global name, high quality,
• 13:08
  Speaker 1: easy to do. The last people to get into the
• 13:11
  Speaker 1: market to push it up the most. You keep pushing
• 13:13
  Speaker 1: it up even as it's starting to fall. Those people,
• 13:17
  Speaker 1: they were too afraid to buy anything before, so they
• 13:19
  Speaker 1: might buy the stock of the company they worked for.
• 13:21
  Speaker 1: They might buy the stock of the company their spouse
• 13:23
  Speaker 1: works for. They might buy the one that brother works for.
• 13:26
  Speaker 1: And when you get a little beyond that, they buy
• 13:28
  Speaker 1: big global, safe names. Ken Fisher, thank you so much
• 13:31
  Speaker 1: for joining us. Ken Fisher, Founder, chairman and co chief
• 13:34
  Speaker 1: investment officer of Fisher Investments. Shoppers spent a record seventy
• 13:55
  Speaker 1: seven point five billion dollars online. That's just since November
• 14:00
  Speaker 1: one through yesterday. Every single one of those forty four
• 14:04
  Speaker 1: days has been a billion dollar day. Some shocking statistics,
• 14:09
  Speaker 1: uh from Adobe Sense and I'd love to get some
• 14:13
  Speaker 1: insight on what we can expect in the remaining a
• 14:16
  Speaker 1: few months and weeks of the year to America. Affney
• 14:19
  Speaker 1: joins us now. She's senior director of Adobe Digital Insights,
• 14:23
  Speaker 1: which has been looking into some of the data from
• 14:27
  Speaker 1: the biggest online retailers and trying to project what we
• 14:31
  Speaker 1: can expect. Tamara, thank you so much for joining us.
• 14:35
  Speaker 1: Good morning. It's great to be here. Good morning. So
• 14:37
  Speaker 1: so let's just get us start with how much can
• 14:41
  Speaker 1: we see online sales accelerate before it becomes a logistics nightmare. Oh,
• 14:46
  Speaker 1: that's a really great question. We actually are seeing right
• 14:49
  Speaker 1: now about a thirteen point one percent growth in online
• 14:53
  Speaker 1: shopping versus last year. We're expecting that to end up
• 14:56
  Speaker 1: at thirteen point eight percent because the last couple of
• 14:59
  Speaker 1: weeks of of the month actually turned out to be
• 15:02
  Speaker 1: higher growth rate months weeks because of the fact that
• 15:06
  Speaker 1: people can ship later and later, Which brings me to
• 15:09
  Speaker 1: your question, which is how much more can we ship?
• 15:11
  Speaker 1: And Uh, I think that is we're just lucky that
• 15:14
  Speaker 1: we haven't had any big storms to slow down any
• 15:17
  Speaker 1: of those shipping and delivery services. Well, I mean we've
• 15:20
  Speaker 1: already heard about ups, for example, being worried about some
• 15:25
  Speaker 1: kind of logistic interruption. I'm sure that they're all racing
• 15:30
  Speaker 1: to make sure that their stations are up to speed.
• 15:32
  Speaker 1: We know that UPS and FedEx both are considering having
• 15:35
  Speaker 1: some kind of voluntary pick up at drug stores or
• 15:39
  Speaker 1: local businesses to try to expedite some of the the deliveries.
• 15:46
  Speaker 1: I'm just wondering, is the infrastructure okay with this growth?
• 15:50
  Speaker 1: At what point will it not be Well? At this
• 15:52
  Speaker 1: point seems to be okay, but you do see the
• 15:55
  Speaker 1: pure play online retailers investing in actual physical store look stations,
• 16:00
  Speaker 1: and part of the reason why they be doing that
• 16:02
  Speaker 1: is to make sure they do have a place to
• 16:04
  Speaker 1: drop off when the event happens that online shopping overcomes
• 16:08
  Speaker 1: our logistic capacity and trucking just becomes overloaded. Uh. The
• 16:13
  Speaker 1: other thing is going on right now is that the
• 16:15
  Speaker 1: average order value that's how much is put into a cart,
• 16:18
  Speaker 1: is a little bit down, but the amount of orders
• 16:21
  Speaker 1: is up, and that means there are more and more
• 16:23
  Speaker 1: boxes floating around. I was in Manhattan last year and
• 16:26
  Speaker 1: it was a sea of boxes. I'm sure it's like
• 16:28
  Speaker 1: that today. So it's so yes, this is going to
• 16:30
  Speaker 1: be a challenge. But Amazon Whole Foods now, so anywhere
• 16:34
  Speaker 1: there's a whole Foods. If they want to ship to
• 16:36
  Speaker 1: that location, they might be able to just have people
• 16:38
  Speaker 1: going to pick up stuff. So is the the sales profile?
• 16:42
  Speaker 1: Is it pretty much even across the retailers. Is it
• 16:45
  Speaker 1: mostly Amazon dot Com that's sucking up all the gains
• 16:49
  Speaker 1: here or were also seeing an increase in Walmart and
• 16:52
  Speaker 1: even in same Nordstrom. Well, you know, in my data set,
• 16:56
  Speaker 1: I need to give you more broad answer, so I
• 16:58
  Speaker 1: can tell you that the law are just retailers. The
• 17:01
  Speaker 1: ones who have a massive shopping catalog where it's a
• 17:04
  Speaker 1: one shop kind of deal are picking up much more
• 17:07
  Speaker 1: than average. The place where small retailers are winning is
• 17:11
  Speaker 1: in the mobile shopping category. They're actually with a more
• 17:15
  Speaker 1: targeted catalog and more specific items that you go there
• 17:18
  Speaker 1: to buy. It's much easier when you're under mobile phone.
• 17:21
  Speaker 1: I don't know about you, but if I want to
• 17:23
  Speaker 1: go find something like a silver bracelet, I don't want
• 17:27
  Speaker 1: to look at a thousand pages on my phone. So
• 17:30
  Speaker 1: that so there's a place for small retailers. There's obviously
• 17:34
  Speaker 1: the big places for the super large retailers. The middle
• 17:36
  Speaker 1: guys are not doing so hot. What about apparel? Apparel
• 17:41
  Speaker 1: is really interesting It's one of the only categories that
• 17:43
  Speaker 1: continues to see discounts even after Christmas is over. Right
• 17:48
  Speaker 1: now with discounts, we're still seeing some fairly good deals.
• 17:51
  Speaker 1: TVs are at about fifteen point three percent discount that's
• 17:55
  Speaker 1: coming off of though on Black Friday, So things are
• 17:58
  Speaker 1: starting to get more and more sensitive. But a perilous
• 18:01
  Speaker 1: one of those areas that doesn't get more expensive. It
• 18:03
  Speaker 1: actually gets cheaper as soon as you get into January.
• 18:06
  Speaker 1: Are we seeing tech really still being the hot spot?
• 18:10
  Speaker 1: And if so, is it all concentrated in one area
• 18:13
  Speaker 1: is it pretty much across the board with basically kids
• 18:16
  Speaker 1: across the world seeing what my children do, which is
• 18:19
  Speaker 1: just they want anything and all things tech. It's true,
• 18:22
  Speaker 1: tech is one of those categories that just keeps growing
• 18:25
  Speaker 1: and growing. In fact, it's almost hard to differentiate a
• 18:28
  Speaker 1: toy from tech at this point. Is the new video
• 18:32
  Speaker 1: game console the PlayStation for Pro with VR is that tech?
• 18:36
  Speaker 1: Or is that a game or toy? What is that now?
• 18:39
  Speaker 1: But yeah, the electronics category is seeing iPads and air
• 18:43
  Speaker 1: pods and Amazon Fire TVs and echo devices flying off
• 18:47
  Speaker 1: the shelves, and those discounts are pretty good right now
• 18:50
  Speaker 1: as well. Computers, for example, are at about seven percent down.
• 18:55
  Speaker 1: Black Friday saw six discounts, So again all of that
• 19:00
  Speaker 1: it's going to be under the Christmas tree and giving
• 19:03
  Speaker 1: gifts to all those from every category from kids to
• 19:07
  Speaker 1: two dads to moms and and and even grandparents are
• 19:10
  Speaker 1: getting in on the tech tech buying. To Mary Gaffney,
• 19:12
  Speaker 1: thank you so much for joining us to Mary Gaffney
• 19:15
  Speaker 1: is Senior director of Adobe Digital Insights. There's been a
• 19:34
  Speaker 1: lot of talk about retailers that have slowly been dying
• 19:38
  Speaker 1: for a number of years, and the question has been
• 19:41
  Speaker 1: when are they going to finally kick the bucket? You know?
• 19:44
  Speaker 1: And today I looked at a story at Bonton's Stories
• 19:47
  Speaker 1: to lead a December fifteenth payment on some of its debt.
• 19:51
  Speaker 1: Hasn't a fault yet. They still have a just grace period,
• 19:54
  Speaker 1: but it's sort of eching closer to that sort of
• 19:58
  Speaker 1: tipping point. Bert Flickinger here with us, managing director at
• 20:01
  Speaker 1: Strategic Resource Group UH Bonton is one of these stores
• 20:06
  Speaker 1: that has been on death watch. Is this the final nil?
• 20:09
  Speaker 1: It could be the final nil, Lisa for three reasons. One,
• 20:13
  Speaker 1: it's primarily a rust belt retailer, and the better economy
• 20:18
  Speaker 1: hasn't gotten to the regions where many of the retail
• 20:21
  Speaker 1: stores are to Uh, the off price retailers from Burlington
• 20:25
  Speaker 1: to t j X Max Marshalls have opened very aggressively
• 20:29
  Speaker 1: against them, So that's very problematic. And three, they've had
• 20:33
  Speaker 1: a lot of leadership changes. So when when they when
• 20:36
  Speaker 1: they lost a couple of good CEOs back to back.
• 20:40
  Speaker 1: The vendors had been supportive of the Bontan stores, but
• 20:42
  Speaker 1: the Herburger stores have been in recently in North Dakota, Minnesota,
• 20:47
  Speaker 1: upper Midwestern region, Carson's in Chicago. Uh, inventories a little light,
• 20:53
  Speaker 1: the circular pages, the ad pages a little light. Uh
• 20:56
  Speaker 1: So getting the cash in for Christmas, Hanukah, New Year's
• 20:59
  Speaker 1: is going to be concerning to your important point. Well,
• 21:02
  Speaker 1: I just have to wonder though, also whether we're reaching
• 21:04
  Speaker 1: a point given the increasing pressure from Amazon dot Com,
• 21:08
  Speaker 1: the fact that there have been so many years when
• 21:11
  Speaker 1: these struggling retailers have failed to turn themselves around. Dr J. C. Penney,
• 21:15
  Speaker 1: I'm talking Claire's, I'm talking uh years, I'm talking you know,
• 21:19
  Speaker 1: you're your sort of a list of laggards. I'm just wondering,
• 21:22
  Speaker 1: is next year going to be the one when we
• 21:24
  Speaker 1: actually start to see the fallout here. Next year is
• 21:27
  Speaker 1: going to be the one. And then uh t TM
• 21:29
  Speaker 1: or trailing twelve months is you You and your team
• 21:32
  Speaker 1: of Bloomberg News have reported well as well as the
• 21:35
  Speaker 1: Bloomberg terminal twenty retail chains of file for either bankruptcy
• 21:39
  Speaker 1: or liquidation this year, so in the last twelve months.
• 21:43
  Speaker 1: And but the key ones to your your key point
• 21:47
  Speaker 1: are going to be in and nineteen and primarily eighteen
• 21:53
  Speaker 1: where the vendors are seeing price deflation. Ors Tom Keane
• 21:58
  Speaker 1: always says, I want to know, ay, you are average
• 22:01
  Speaker 1: unit retail and the vendors are seeing average unit retailer.
• 22:05
  Speaker 1: The retailers are seeing average unit retail. And if you
• 22:08
  Speaker 1: can't drive higher sales like the well capitalized competitors, the Bonton's,
• 22:12
  Speaker 1: the Sears, the Claire's, all the key concerning change of
• 22:16
  Speaker 1: referenced are are brilliant for tough times. What's the what's
• 22:21
  Speaker 1: the catalyst here? Why now? Or why next year? Why now?
• 22:25
  Speaker 1: Is the toys r US bankruptcy really caught the vendor
• 22:28
  Speaker 1: community by surprise. We've met with the vendor community over
• 22:32
  Speaker 1: the summer. They've been fully supportive. UH two toys r
• 22:35
  Speaker 1: US and you could see it in the Toys her
• 22:38
  Speaker 1: US ads that ran last weekend and uh pre and
• 22:42
  Speaker 1: during Black Friday it's only four pages, while Target is
• 22:46
  Speaker 1: putting out a seventy two page full color toy book.
• 22:49
  Speaker 1: And so it is your referencing Amazon shifting the sales,
• 22:53
  Speaker 1: Target Walmart shifting the sales. The under capitalized retailers aren't
• 22:57
  Speaker 1: getting the extra money to advertise TV, radio, social, digital
• 23:02
  Speaker 1: connective and the key circulars that go to the homes
• 23:05
  Speaker 1: in the in the Sunday papers, and with that it
• 23:08
  Speaker 1: hurts customer count. And Bontan and the others don't benefit
• 23:12
  Speaker 1: from Star Wars setting box office records this weekend. They
• 23:16
  Speaker 1: have the FAO Schwartz toys, not the Star Wars license toys.
• 23:20
  Speaker 1: So sad. I'm looking at Bonton bonds. I mean, they've
• 23:23
  Speaker 1: been doing terribly for a long time, but they are
• 23:26
  Speaker 1: trading even lower right now. I'm looking uh less thirty
• 23:30
  Speaker 1: one cents on the dollar. I'm looking at. These are
• 23:33
  Speaker 1: the ones that come to one that is not a
• 23:36
  Speaker 1: very encouraging sign. Lowest in trading days. So I guess
• 23:41
  Speaker 1: that there was one lower, but it's it's close to
• 23:43
  Speaker 1: the lowest price on record. But it seems to be
• 23:45
  Speaker 1: uh that there also is a shift in debt markets.
• 23:49
  Speaker 1: There's a key shift in debt markets. You're referencing that
• 23:52
  Speaker 1: no one other than you and Bloomberg are reporting because
• 23:55
  Speaker 1: you're not able to refinance now the way you would
• 24:00
  Speaker 1: have been able to refinance even a quarter go. So
• 24:02
  Speaker 1: it's beyond toys or US. It's like you said, it's Bonton,
• 24:06
  Speaker 1: it's sears. Pet Smart bonds on the Bloomberg terminal have
• 24:09
  Speaker 1: traded way down. What happened there, It's it's a it's
• 24:13
  Speaker 1: a combination really good reverse category killing by Walmart and
• 24:18
  Speaker 1: b J's Wholesale Club and Albertson, Safeway, Windco, a number
• 24:22
  Speaker 1: of others because pet and all the way to pet
• 24:26
  Speaker 1: accessories is the fastest growing category and retail. But pet
• 24:30
  Speaker 1: Smart hired a lot of consultants that didn't know what
• 24:33
  Speaker 1: the devil they were doing, didn't know the detail of retail.
• 24:37
  Speaker 1: Bad releases, bad capex decisions, the new new stores are
• 24:41
  Speaker 1: losing money, and uh, the the stores really aren't aren't
• 24:45
  Speaker 1: built efficiently, so it should be best of times for
• 24:49
  Speaker 1: pet Smart, But it's dick and esque. It's worst of
• 24:51
  Speaker 1: times to your point on the Bloomberg terminal with the
• 24:53
  Speaker 1: bonds today on pet Smart, well, just to play devil's advocate,
• 24:57
  Speaker 1: I mean, these companies, these stores is have managed to
• 25:01
  Speaker 1: sort of limp along for a while, and perhaps they've
• 25:04
  Speaker 1: closed stores enough, and perhaps they'll close more stores next year.
• 25:08
  Speaker 1: What's not to say, you know, there is a place
• 25:11
  Speaker 1: for brick and mortar. We're seeing Amazon move more into
• 25:13
  Speaker 1: brick and mortar. You know, they can drag along for
• 25:17
  Speaker 1: a little long there. There they can drag along, and
• 25:20
  Speaker 1: there clearly is a place for brick and mortar. But
• 25:23
  Speaker 1: at the same time, we were going through the bontan
• 25:25
  Speaker 1: Herberger stores in the north central states between the Dakotas
• 25:28
  Speaker 1: and Minnesota, Wisconsin. We were also going through Chuck and
• 25:31
  Speaker 1: Don's super Pet stores, a local entrepreneur one shop now
• 25:36
  Speaker 1: has dozens of stores. It's just pounding pet smart into
• 25:39
  Speaker 1: the ground with a lot of natural and organic pet food.
• 25:42
  Speaker 1: Fleet Farms now owned by kkr I and Menard's and
• 25:47
  Speaker 1: a number of others are also doing really well with
• 25:49
  Speaker 1: pet and pet smart. By going to the big house
• 25:53
  Speaker 1: consulting firms lost a lot of the great leadership they
• 25:56
  Speaker 1: had that built the company up during the twentieth century
• 25:59
  Speaker 1: until about five six years ago. Uh. And and just
• 26:03
  Speaker 1: real quick, what are you expecting with uh with this
• 26:06
  Speaker 1: year's holiday sales. I mean, I've heard from some people
• 26:09
  Speaker 1: that it seems like it's pretty strong so far. Would
• 26:11
  Speaker 1: you say that that's what you're hearing? Very strong? We
• 26:13
  Speaker 1: also checked the post office. Is the FedEx deposts and
• 26:17
  Speaker 1: the UPS deposts. I've never seen the shipping deposts so packed,
• 26:22
  Speaker 1: with a record two million parcels to be shipped bet
• 26:26
  Speaker 1: between million between between the big three post office UPS, FedEx,
• 26:31
  Speaker 1: and Bloomberg terminals. Reporting FedEx near a fifty two week
• 26:34
  Speaker 1: high today. I think, thinking part that should should go
• 26:37
  Speaker 1: higher because the volumes just astounding. But the retail stores
• 26:42
  Speaker 1: with new leaders, good merchants are bouncing back, and Penny
• 26:46
  Speaker 1: On the Bloomberg terminals actually going up in terms of
• 26:49
  Speaker 1: the bonds that prefers and the the equity and sympathy
• 26:52
  Speaker 1: that they'll get. Ship shoppers who see out of stocks
• 26:56
  Speaker 1: at Bonton shift to Penny and seares the shoppers of
• 27:00
  Speaker 1: already safe save Penny during during the last two years too.
• 27:04
  Speaker 1: Bert Flickinger, thank you so much. The only one I
• 27:06
  Speaker 1: know is they're counting the boxes that are lined up
• 27:10
  Speaker 1: that are ready to get shipped out for the holidays.
• 27:12
  Speaker 1: Burt Flickinger, thank you as always, Managing director at Strategic
• 27:16
  Speaker 1: Resource Group. Thanks for listening to the Bloomberg P and
• 27:22
  Speaker 1: L podcast. You can subscribe and listen to interviews at
• 27:25
  Speaker 1: Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm
• 27:30
  Speaker 1: Pim Fox. I'm on Twitter at pim Fox. I'm on
• 27:33
  Speaker 1: Twitter at Lisa Abramo. It's one before the podcast. You
• 27:37
  Speaker 1: can always catch us worldwide on Bloomberg Radio