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Hi-Yield Opportunity In Beat-Down California Utilities (Podcast) · Bloomberg Intelligence

0:02
Speaker 1: Welcome to the Bloomberg Penel Podcast. I'm Paul swing you.
0:05
Speaker 1: Along with my co host Lisa Brahma Waits. Each day
0:07
Speaker 1: we bring you the most noteworthy and useful interviews for
0:10
Speaker 1: you and your money. Whether at the grocery store or
0:12
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
0:15
Speaker 1: podcast or wherever you listen to podcasts, as well as
0:17
Speaker 1: at Bloomberg dot com. It has been one of the
0:21
Speaker 1: best starts to the year on record for US high
0:25
Speaker 1: old bonds returns exceeding five per cent. The extra yield
0:29
Speaker 1: investors are earning to own the debt versus safer notes
0:33
Speaker 1: has compressed to the lowest in months. Joining us here
0:37
Speaker 1: is uh someone who can weigh in on whether it
0:39
Speaker 1: is time to start pairing this risk of your debt
0:41
Speaker 1: around the edges. That is Greg Han, President and Chief
0:44
Speaker 1: investment Officer and Win throw Up Capital Management normally in Indianapolis,
0:47
Speaker 1: but joining us here today in our Bloomberg Interactive Broker Studios. Greg,
0:51
Speaker 1: what's your view on this? Is it time to sell
0:53
Speaker 1: hi yield bonds? Oh? No, we actually um right now,
0:57
Speaker 1: We're actually still buying high yield. We think there's value there.
0:59
Speaker 1: The the spreads have come in since the fourth quarter,
1:03
Speaker 1: but they're still room for it to move in volatilities down.
1:05
Speaker 1: So with spread ball down, we think that you're going
1:07
Speaker 1: to see more spread contraction. So what are some of
1:09
Speaker 1: the sectors in a high yield space that you're looking
1:11
Speaker 1: at right now? Uh, so, energy, telecom both, there's areas
1:15
Speaker 1: there that we like. UM. We've been in the in
1:17
Speaker 1: the financial side, higher quality, the double B space on financials.
1:21
Speaker 1: Are there any sectors that you're just no matter where
1:23
Speaker 1: the vat, you're just staying away from. UM. So we'll
1:26
Speaker 1: look at anything. I mean, honestly, especially when you look
1:29
Speaker 1: in the utility space, and with what's going on Pacific
1:31
Speaker 1: Gas and Electric that that area weo we think, wait, wait, wait,
1:35
Speaker 1: you're buying right now, not right now. So here's the thing,
1:38
Speaker 1: but look at so, look at so calid and Mission Energy.
1:42
Speaker 1: In other words, just because the other utilities that are
1:44
Speaker 1: getting slammed because of issue there, in order to get
1:49
Speaker 1: out of the bankruptcy, they've got to fix the legislation
1:51
Speaker 1: because you can't you can't leave bankruptcy and and still
1:54
Speaker 1: have that legislation in place where the utility is liable
1:58
Speaker 1: for the next fire. Because you haven't need anything, so
2:00
Speaker 1: they got to fix it. And I think that bodes
2:02
Speaker 1: well for all the southern utilities. Basically, this is a bet.
2:05
Speaker 1: Buying the bonds of those other California utilities is a
2:09
Speaker 1: bet that California will be forced to change its legislation
2:13
Speaker 1: so that these utilities are not held responsible for all
2:16
Speaker 1: of the damages of wildfires. And that's fascinating. That is
2:19
Speaker 1: that is a I would say, a gutsy call, because
2:22
Speaker 1: you're basically waiting for Sacramento to come and kind of
2:26
Speaker 1: make it all right for you. Well and think about it, though,
2:28
Speaker 1: in the capitalist society, can you really have publicly traded
2:31
Speaker 1: entity that is not played by the same rules as
2:34
Speaker 1: every other state in our in our form of capitalism,
2:38
Speaker 1: I don't think it makes sense. So I want to
2:40
Speaker 1: shift gears a little bit. We've seen a rash of
2:43
Speaker 1: deleveraging recently. We've seen a number of companies that are
2:46
Speaker 1: triple B rated who have agreed to pay down debt.
2:50
Speaker 1: I'm thinking of some of the big communications companies A
2:53
Speaker 1: T and T Verizon. You're laughing. I will find out
2:56
Speaker 1: why right now. Why are you laughing? So A T
3:00
Speaker 1: and T um has the debt level of Portugal. So
3:04
Speaker 1: and if you look at the total size of a
3:08
Speaker 1: T and T S debt is the equivalent of one
3:10
Speaker 1: of the top twenty five sovereign and debted nations billion
3:13
Speaker 1: dollars or something like that, something like that. So in
3:15
Speaker 1: other words, this deleveraging is yeah, they have to do
3:19
Speaker 1: it in order to state in order to stay trip
3:21
Speaker 1: will be rated. Now really this this is a cusp credit.
3:24
Speaker 1: Um we're going to expect to write down on the
3:26
Speaker 1: direct TV side, so they have to they have to
3:29
Speaker 1: deliver this. Wow. Interesting interesting, How about like another name
3:32
Speaker 1: it's similar to that Comcast that's that looks like a
3:35
Speaker 1: better profile. Yeah, we like Comcast and this this whole space,
3:38
Speaker 1: this is this is amazing. So in our generation to
3:40
Speaker 1: see the shift in technology that's taking place by going
3:44
Speaker 1: to streaming and what's what's happening with all the cord cutting,
3:47
Speaker 1: this is um so to be fully integrated like Comcast Disney,
3:50
Speaker 1: this is this is gonna be interesting. So you sound
3:52
Speaker 1: pretty sanguine right now on us credit. So you well, okay,
3:57
Speaker 1: we've had a heck of a rebound, so we're we're
4:00
Speaker 1: benefiting from that. I'll be honest with you December was
4:03
Speaker 1: tough because we gave up a lot in the in
4:05
Speaker 1: the last two weeks of the year. Well, let me
4:07
Speaker 1: tell you how tough it was. Um, I believe when
4:09
Speaker 1: you were here in December, you said, quote the financial
4:12
Speaker 1: position of the US is a disaster end quote. Have
4:15
Speaker 1: we changed as you bringing up You're absolutely no, we
4:19
Speaker 1: haven't changed. We still think it's a disaster. But and
4:21
Speaker 1: there's no So it's gonna be interesting because we're gonna
4:24
Speaker 1: come into the elections now, so two thousand twenty, we're
4:26
Speaker 1: going to start to hear dialogue on it. The debt
4:29
Speaker 1: levels is it's not part of the dialogue that's taking
4:31
Speaker 1: place right now, but you can't ignore it. So here's
4:35
Speaker 1: my question, especially at a time when JP Morgan and
4:38
Speaker 1: now what we're seeing with Toronto Dominion Bank and Canadian
4:41
Speaker 1: Imperial Bank of Canada both out today with their results,
4:44
Speaker 1: all raising issues about deteriorating credit worthiness of some of
4:48
Speaker 1: their borrowers. JP Morgan said that they're starting to tighten
4:51
Speaker 1: their credit uh credit conditions a little bit just to
4:55
Speaker 1: make sure that they don't deal with a lot of
4:57
Speaker 1: loss in the next downturn. What do you think could
5:00
Speaker 1: or will cause the next credit crisis and when Yes,
5:04
Speaker 1: so we and we talked about this last time too,
5:06
Speaker 1: is we're on the front end. We think we're on
5:07
Speaker 1: the front end of a potential shift in the credit cycle.
5:11
Speaker 1: We still believe in cycles. So it's gonna it's gonna
5:14
Speaker 1: show differently this time because traditionally we'd go through the
5:17
Speaker 1: banking sector, we'd see UM, an increase in loan reserves
5:21
Speaker 1: and higher non performing loans. That actually hasn't happened. So
5:24
Speaker 1: we were starting to see the front end of it,
5:26
Speaker 1: but we think it's going to be expressed in the
5:28
Speaker 1: public markets through leverage loans. So we're seeing you know,
5:31
Speaker 1: one of the telltale signs is as structured security issuance
5:34
Speaker 1: is up, clos are up, and um, we're seeing credit
5:38
Speaker 1: light uh loans so I'm sorry, covenant light loans that
5:42
Speaker 1: are coming to markets. So these are these are all
5:44
Speaker 1: signs the volume increase and we'll look back. I think
5:48
Speaker 1: on vintage two thousand seventeen, two thousand eighteen, and two
5:50
Speaker 1: thousand nineteen vintage structured securities could be problematic. How about
5:54
Speaker 1: you know, we have the FED on the sidelines. We
5:57
Speaker 1: have you know, earnings were pretty much done earnings. Do
6:00
Speaker 1: you think the market is fairly discounting some of the
6:02
Speaker 1: geopolitical issues out there, whether it's spoints China today, North
6:06
Speaker 1: Korea today, Brexit yesterday, what's the market? Absolutely not. And
6:10
Speaker 1: this is the part I just I just don't understand.
6:12
Speaker 1: I'll confess this, but growing up in the in the
6:14
Speaker 1: business in the eighties and nineties, when you had geopolitical
6:17
Speaker 1: events at moved markets. But to have Brexit, which is
6:21
Speaker 1: probably one of the single biggest events in the capital
6:23
Speaker 1: markets in the last thirty years, and there's I think
6:27
Speaker 1: Barkley's last week had a reserve set aside for it,
6:29
Speaker 1: but it's the only bank that we've seen that's put
6:31
Speaker 1: reserving against it. Corporate you know, the corporations are not
6:34
Speaker 1: set up for it. And I don't I don't think
6:36
Speaker 1: the markets are really discounting it. I think the markets
6:38
Speaker 1: are looking at it. You know this is going to
6:39
Speaker 1: get fixed somehow, or the markets are profoundly bored by
6:43
Speaker 1: all of the discussion that's been going on for two
6:45
Speaker 1: years and then they're saying, show be something I can
6:48
Speaker 1: hook my teeth into. Otherwise forget about it. Just real
6:52
Speaker 1: quick here, emerging markets, are you bullish or bearish, So
6:55
Speaker 1: we uh, this is Lisa, this is one area we
6:57
Speaker 1: really want to go into. Its lagged the last three years,
7:01
Speaker 1: and we still think it's early. And what we're looking
7:03
Speaker 1: for is credit flow. We're looking for credit that's flowing
7:06
Speaker 1: into the emerging economies and we're not seeing it, but
7:09
Speaker 1: we think we're on the cusp of that. So I
7:11
Speaker 1: think by the end of the year we're going to
7:12
Speaker 1: have an increase to that. We're in particular, so we're
7:15
Speaker 1: we look at the Big Four, so it's it's and
7:17
Speaker 1: we're not in there, but the Big four of China, Russia,
7:20
Speaker 1: India and Brazil, and it's I think China is gonna
7:22
Speaker 1: dictate what's gonna happen here. So interesting, very very good.
7:25
Speaker 1: We'll take well, well, have you back when you're starting
7:27
Speaker 1: to get into your mergery markets and we'll certainly take
7:30
Speaker 1: a look at that. Greg Han, President, Chief Investment Officer,
7:33
Speaker 1: Winthrop Capital Management, based in Indianapolis, but we're fortunate to
7:37
Speaker 1: have him here in our Bloomberg Interactive Brokers studio here
7:40
Speaker 1: in New York. Thank you so much. Greg. Well, the
7:57
Speaker 1: U S and China continue to discuss discussion. It's about
8:00
Speaker 1: possibly having discussions about trade. It is so unclear to
8:04
Speaker 1: me where we are in this process that I have
8:06
Speaker 1: to call upon our own Dr Sam Natapa, who is
8:09
Speaker 1: a frequent visitor here to our Bloomberg Interactive Broker studios.
8:13
Speaker 1: Dr Sam Natapa is president of Empire Global Ventures. All right, Sam,
8:19
Speaker 1: what what's going on? We have this deadline March one.
8:22
Speaker 1: It's gonna get kicked, the cannel get kicked with tariffs.
8:26
Speaker 1: What are you looking for for real progress here? Well,
8:29
Speaker 1: it's very clear that President Trump needs to listen to
8:31
Speaker 1: more Kenny Rogers because he doesn't know how to hold
8:34
Speaker 1: him and he doesn't know how to fold him. We
8:36
Speaker 1: have some sense of what the deal is going to
8:38
Speaker 1: be when President Ji Jinping will come to Florida tomorrow
8:42
Speaker 1: Lago to sign this agreement. One, they're probably going to
8:45
Speaker 1: agree to hold the yuan stable and not devalue in
8:49
Speaker 1: order to make Chinese goods cheaper to come into the
8:51
Speaker 1: US market. To the Chinese will clearly commit to buying,
8:55
Speaker 1: you know, hunting billions of dollars more of US goods.
8:58
Speaker 1: They've already committed to buy I think ten million tons
9:01
Speaker 1: more soya beans, which is about three point five billion
9:04
Speaker 1: dollars already this year. But since the US China trade
9:06
Speaker 1: deficits going to be four hundred billion dollars this year,
9:09
Speaker 1: that's less than one percent of that deficit. So what's
9:13
Speaker 1: that really going to mean? Yesterday, Bob Lightheiser announced that
9:16
Speaker 1: there's now a mechanism by which they will handle this
9:20
Speaker 1: back and forth internally and bilaterally instead of going through
9:24
Speaker 1: the w t O. In other words, the US has
9:26
Speaker 1: a chance to reimpose sanctions if the Chinese don't do
9:29
Speaker 1: what they say they're going to do. So there's a
9:32
Speaker 1: lot of talk, and the top line thing is Donald
9:35
Speaker 1: Trump wants to lower the U s trade deficit, which
9:38
Speaker 1: doesn't really mean anything. The things that really matter, the
9:40
Speaker 1: intellectual property issues, the force technology transfer, the protection for
9:44
Speaker 1: US companies going to do to stuff in China. None
9:47
Speaker 1: of that is being discussed and no progress will be
9:49
Speaker 1: made on that. Why are those big items not being addressed?
9:53
Speaker 1: Those are the ones that move the needle, Those are
9:55
Speaker 1: the ones that Corporate America is most concerned about. How
9:58
Speaker 1: are they not on the agenda? To be clear, US
10:02
Speaker 1: Trade Representative Robert Lightheiser has dedicated thirty years of his
10:05
Speaker 1: career to focus on this issue. He did this on
10:07
Speaker 1: Japan first, He's doing it on China now. He's deeply
10:10
Speaker 1: focused on that issue. He is being overruled by the
10:13
Speaker 1: President of the United States who's so desperate for a
10:16
Speaker 1: headline that he will undermine the structural integrity of the
10:18
Speaker 1: US economy going forward. All right, let's listen to something
10:22
Speaker 1: that Bob Lightheiser said. US Trade Representative Robert Lightheiser speaking
10:27
Speaker 1: in speaking yesterday in front of the Ways and Means
10:31
Speaker 1: Committee of the U s House of Representatives. Take a
10:33
Speaker 1: listen to what he had to say. I'm not PAULI Anna.
10:36
Speaker 1: I don't believe that this is going to solve all
10:38
Speaker 1: the problems between the United States and China. We have
10:41
Speaker 1: very different systems there in a process of reform or
10:44
Speaker 1: they're not. Depends on what you talked to. If they're
10:47
Speaker 1: in the process as reform, will we'll make headway. If
10:51
Speaker 1: they're not, we're going to go right back to having problems.
10:54
Speaker 1: That was US Trade Representative Robert lighthouser Heiser speaking in
10:58
Speaker 1: front of the House Ways and Means Committee. I have
11:00
Speaker 1: to wonder say just how many allies Bob Ladheiser has
11:04
Speaker 1: among other people who could kind of force President Trump
11:08
Speaker 1: to to sort of consider his point of view a
11:10
Speaker 1: little bit more. The US Chamber of Commerce is on
11:13
Speaker 1: his side, The American Association of Manufacturers is on his side.
11:16
Speaker 1: The problem is none of those people work in the
11:17
Speaker 1: White House, and even if they did, Donald Trump wouldn't
11:20
Speaker 1: listen to them. Well, will it be considered a victory
11:22
Speaker 1: if President Trump gets some sort of agreement that has
11:24
Speaker 1: to do with Soyabeans In other words, Well, markets rally,
11:27
Speaker 1: I mean, because that's essentially how President Trump is valuating it,
11:30
Speaker 1: right it is. But markets are smart, and markets are
11:33
Speaker 1: going to understand that this is lipstick on a pig,
11:37
Speaker 1: and pig is, of course the number one consumed meat
11:39
Speaker 1: in all of China. So nothing's going to change, all right?
11:43
Speaker 1: Who when when you take a look at the two
11:45
Speaker 1: sides and you take a look at some of the
11:47
Speaker 1: bigger issues are out there, But we don't have to
11:48
Speaker 1: do them all at once, but piecemeal. Maybe over the
11:50
Speaker 1: next couple of years. This China becoming increasingly incentive to
11:55
Speaker 1: make some changes that their economy slowing, maybe even slower
11:58
Speaker 1: than people believe. Isn't there growing incentive on China to
12:02
Speaker 1: actually come to the table on some of these issues. Yes,
12:04
Speaker 1: there is tremendous incentive for China to change. That doesn't
12:07
Speaker 1: mean there's incentive for them to compromise with the United States.
12:11
Speaker 1: In eighteen, the Chinese economy slow to six point six
12:14
Speaker 1: percent GDP growth, which is the lowest recorded since uh
12:17
Speaker 1: the nineteen nineties. Over the last three months, factory activity
12:21
Speaker 1: in China is the lowest it's been in since the
12:24
Speaker 1: nineteen nineties. There's a there tremendous indicators showing that the
12:28
Speaker 1: Chinese economy is slowing and that Ji Jinping has to
12:31
Speaker 1: do something. But forgive me, the one thing is he's
12:35
Speaker 1: under tremendous domestic pressure himself. Politically. He opened the path
12:39
Speaker 1: for him to be able to run for a third
12:40
Speaker 1: and fourth term as president, but if he doesn't deliver,
12:43
Speaker 1: that's not going to come true. So just to push
12:45
Speaker 1: back a little bit on this idea that President Trump
12:48
Speaker 1: is going to make an economic mistake on pretty big
12:51
Speaker 1: proportions if he just leaves the trade agreement at soybeans
12:54
Speaker 1: and other agricultural and other imports and exports. Isn't this
12:58
Speaker 1: just the opening salve those of ongoing discussions. Isn't the
13:01
Speaker 1: idea that the US and China can have some sort
13:04
Speaker 1: of agreement laying the groundwork for for future negotiations over
13:08
Speaker 1: the more substantial issues. It could be if President Trump
13:12
Speaker 1: were consistent enough to hold the line, because the lesson
13:15
Speaker 1: the Chinese just learned is we're going to go through
13:18
Speaker 1: two years of economic turmoil globally and in the end
13:21
Speaker 1: will get a deal that we would have signed two
13:23
Speaker 1: years ago. Sorry, so Sam, They're going to Palm Beach,
13:28
Speaker 1: Florida and lucky them, Um, they sign a deal. Good
13:31
Speaker 1: for them. Um. What are next steps in the China
13:34
Speaker 1: U S trade negotiations? Uh, Robert Leitheiser will again intend
13:40
Speaker 1: and try to put pressure on the Chinese to make
13:42
Speaker 1: structural changes, particularly on the intellectual property side, to technology
13:46
Speaker 1: transfer side, and the treatment of foreign companies inside China.
13:50
Speaker 1: Master card and visa cannot function in China, and that
13:53
Speaker 1: was one of the things that people were looking at
13:55
Speaker 1: in this negotiation to see if the Chinese would open
13:57
Speaker 1: up their domestic market. They're not going to. The question
14:01
Speaker 1: is Robert Leitheiser is in a difficult position because he
14:04
Speaker 1: just got his legs cut out of from under him
14:06
Speaker 1: by his boss and the Chinese assuming they'll do that again. Well,
14:08
Speaker 1: that That's what I was gonna say, is sort of
14:10
Speaker 1: you know that seems like some of these issues are
14:12
Speaker 1: gonna have a hard time getting yourself. Can you give
14:14
Speaker 1: us a sense of why Visa MasterCard can operate in China? Uh?
14:18
Speaker 1: This is a specific regulatory issue that both the Chinese
14:22
Speaker 1: Ministry of Finance and other Chinese regulators have uh not
14:26
Speaker 1: granted them a license to operate inside China. So that
14:31
Speaker 1: is a Chinese governmental decision. Uh. And it's we'll call
14:34
Speaker 1: it a non tariff barrier, if you will, Dr Sam Natapa,
14:38
Speaker 1: thank you so much for being here as always. Dr
14:40
Speaker 1: Sam Natapa is president of Empire Global Ventures, talking about
14:44
Speaker 1: the latest between the US and China trade negotiations, the
14:47
Speaker 1: dollar gaining a little against the U N today. Right now,
15:08
Speaker 1: let's shift our focus to the retail sector. We've gotten
15:11
Speaker 1: a host of earnings from t j X to Macy's
15:14
Speaker 1: two j C penny and really the question becomes, are
15:17
Speaker 1: we seeing a turn in the tide? There were a
15:19
Speaker 1: lot of short sellers targeting these companies. Are they being
15:23
Speaker 1: blown out of the water and forced to offend with
15:27
Speaker 1: actually a relatively healthy retail sector. Joining us now is
15:29
Speaker 1: Evan Clark deputy Managing editor for Women's Where Daily, joining
15:33
Speaker 1: us here in our Bloomberg Interactive Broker's studios. So, Evan,
15:36
Speaker 1: is there a big takeaway so far from all of
15:38
Speaker 1: the retail earnings we've gotten so far? Right? So, I
15:41
Speaker 1: think going into the holiday season, there was big expectations
15:45
Speaker 1: around sales, and I think that hasn't really panned out.
15:48
Speaker 1: I think sales were not quite as bad as the
15:50
Speaker 1: overall number that came out from the government, but it's
15:54
Speaker 1: they really didn't turn out the way that the industry
15:56
Speaker 1: was hoping. So I think the overall story that we
15:59
Speaker 1: are seeing right now is that retailers are being cautious.
16:03
Speaker 1: They've spent a few years really kind of spending to
16:05
Speaker 1: ramp up their online businesses, but now they're starting to
16:09
Speaker 1: hit that kind of hit the expense line a little bit.
16:12
Speaker 1: They're cutting back there, being more cautious going forward on
16:15
Speaker 1: how they spend their money. For instance, macy has just
16:18
Speaker 1: cut a hundred million dollars out of their expense structure,
16:21
Speaker 1: kind of reducing their top management and sort of simplifying
16:24
Speaker 1: things there. So that will help them be more flexible
16:28
Speaker 1: should the economy turn. You know, you can win and
16:31
Speaker 1: if that that happens so Evan really over the last
16:34
Speaker 1: several years as I listened to earning his conference calls
16:37
Speaker 1: from these retailers, it's a combination of cutting costs, as
16:40
Speaker 1: you mentioned with Macy's reducing um, you know, footprint, closing stores.
16:44
Speaker 1: We heard that from J. C. Penny closing eighteen stores.
16:47
Speaker 1: What is your sense for how much more the industry
16:50
Speaker 1: has to go in terms of reducing its footprint of
16:54
Speaker 1: physical stores to deal with what is now a e
16:57
Speaker 1: commerce growing e commerce economy. Yeah, you know, I don't
17:00
Speaker 1: the numbers I don't have off the top of my head,
17:03
Speaker 1: but the U S economy historically has had something like
17:06
Speaker 1: six times more retails space per pet capita than the
17:10
Speaker 1: next closest market, which is the UK. I think that
17:13
Speaker 1: number has come down some lately, but I think there's
17:16
Speaker 1: still a long way to go just where the right
17:19
Speaker 1: balance is. I don't think anyone really knows. But the
17:22
Speaker 1: buzzword we get in retail right now is experience. So
17:25
Speaker 1: everyone's trying to figure out how you know, the stores
17:30
Speaker 1: and the website are very clearly you know that you've
17:32
Speaker 1: got the same brand, the same products, but they're very
17:34
Speaker 1: clearly different experiences. So when stores do get people, when
17:40
Speaker 1: retailers do get people in their stores, what do they
17:42
Speaker 1: give them, How are they keeping them there, what kind
17:44
Speaker 1: of you know, what are they doing to engage them.
17:46
Speaker 1: That's why we've seen a whole lot of food come
17:48
Speaker 1: into retail. We're just seeing more sort of like testing
17:52
Speaker 1: with the Canada. Goose has cold rooms where it drops
17:56
Speaker 1: to minus twenty or something and you put in their
17:57
Speaker 1: jacket and see how cozy you feel. So I think
18:00
Speaker 1: that that I don't know the answer is. I think more.
18:04
Speaker 1: I think we'll see that the foot print kind of
18:07
Speaker 1: go down some more. I don't know when it ends.
18:09
Speaker 1: And that's sort of the ten million dollar question. I
18:11
Speaker 1: think this has also been an earning this period where
18:15
Speaker 1: there's been a huge divergences between the winners and the losers.
18:18
Speaker 1: I mean, I'm looking at Macy, as you mentioned them,
18:20
Speaker 1: shares down seventeen percent so far year to date, whereas
18:23
Speaker 1: t j X, which is banked on the whole experience
18:25
Speaker 1: of treasure hunting and finding bargains, up nearly fifteen percent. Right,
18:30
Speaker 1: And so it definitely has been uh a sort of
18:34
Speaker 1: shaking out of the of the sort of weaker players
18:37
Speaker 1: and sort of putting them aside and saying, you know,
18:39
Speaker 1: you still need to figure out what your experience is,
18:41
Speaker 1: what you're sort of claim to fame is versus the
18:45
Speaker 1: winners that are consolidating that power, right right, absolutely, So
18:49
Speaker 1: I think you mentioned the treasure hunt at t j X.
18:52
Speaker 1: I mean t j X has just been a phenomenon.
18:54
Speaker 1: It's been growing tremendously, so it's kind of really transcended
18:58
Speaker 1: that it's initial kind of you know, business model of
19:01
Speaker 1: taking leftover goods in the market and selling it. And
19:04
Speaker 1: they've really at this national brands at a discount price
19:09
Speaker 1: and it's like new, it's new, and it's the frequency
19:12
Speaker 1: is very fast. So if you go to t J
19:15
Speaker 1: Marshals today, it's different, it's going to be different next week.
19:18
Speaker 1: So I think that that model continues to resonate. So
19:22
Speaker 1: people want brands at a good price and like, uh,
19:25
Speaker 1: you know, an environment that is fun or engaging in
19:28
Speaker 1: some way. And I think you know, Macy's is very
19:31
Speaker 1: much uh trying to kind of figure out how they
19:35
Speaker 1: do what they do and how that works for the future.
19:37
Speaker 1: I mean, they're they're working very hard. They've got their
19:39
Speaker 1: program where they're really trying to sharpen the sharpened fifty
19:43
Speaker 1: of their stores to kind of give give a different
19:45
Speaker 1: look to shoppers, and they just expanded that to a
19:48
Speaker 1: hundred and fifty. So so there you know the changes there.
19:52
Speaker 1: They're trying to be um, They're trying to figure out
19:55
Speaker 1: exactly where they need to go. And that's the big
19:57
Speaker 1: question in retail is exactly where do you go? What
20:00
Speaker 1: is the model of the future that kind of really works.
20:03
Speaker 1: So I think that we see a lot of testing
20:05
Speaker 1: across the industry and kind of incrementally moving forward, I
20:08
Speaker 1: mean across the board for retail. The question is can
20:10
Speaker 1: people change fast enough? How about just the consumer as
20:14
Speaker 1: we go through here these fourth quarter numbers, what what
20:16
Speaker 1: are these results tell me about how the consumer is
20:18
Speaker 1: right now, real quickly twenty seconds right the consumer is
20:21
Speaker 1: is still strong. They still have money. They just have
20:23
Speaker 1: a lot more stuff to spend it on. They've got
20:25
Speaker 1: you know, the new iPhones are thousand dollars. There's Netflix
20:29
Speaker 1: costs every month, so there's more places to put the money. Interesting.
20:33
Speaker 1: Thank you very much. Evan Clark, Deputy Managing editor, Woman's
20:36
Speaker 1: Where Daily, joining us here in the bluebrig interact their
20:39
Speaker 1: brokera studio in New York. Thank you so much. Well,
20:56
Speaker 1: the automobile wants both a badge of success and the
20:59
Speaker 1: most convene. A conveyance between points A and B is
21:01
Speaker 1: falling out of favor in cities around the world as
21:04
Speaker 1: ride hailing and other new transportation options proliferate, and concerns
21:08
Speaker 1: over gridlock and pollution spark a revaluation of privately owned cars.
21:12
Speaker 1: To telp us dig into this issue is David Welch.
21:15
Speaker 1: David is our Detroit bureau chief from Bloomberg News, coming
21:18
Speaker 1: to us from Detroit, and this is I have to
21:21
Speaker 1: notice the cover story of the March fourth Bloomberg Business
21:24
Speaker 1: Week coming out. So David, thanks so much for joining us.
21:27
Speaker 1: Are we at peak car? We're getting pretty close and
21:31
Speaker 1: uh so, here's here's what's going on. You see, in
21:33
Speaker 1: the U s we we hit record car sales two
21:36
Speaker 1: years ago. Uh well, going on three, two thou sixteen,
21:39
Speaker 1: still healthy levels, but it's been kind of slowly coming
21:42
Speaker 1: down ever since. In most companies kind of see that
21:44
Speaker 1: happening for a while. Last year in China we saw
21:47
Speaker 1: I'd go backwards for geez, the first time since I've
21:50
Speaker 1: been covering the industry, and that's more than I care
21:52
Speaker 1: to admit. China will continue to grow kind of long term,
21:56
Speaker 1: but the year's a double digit growth, it's kind of
21:58
Speaker 1: behind us. So those are your two biggest markets. You're
22:02
Speaker 1: you're not going to get growth there. In Japan, no way.
22:04
Speaker 1: There will be growth according to General Motors in places
22:08
Speaker 1: like Russia, India, South America, but all those are problematic.
22:13
Speaker 1: India has huge infrastructure problems when it comes to cars,
22:16
Speaker 1: Russia has political instability problems, and South America has currency
22:20
Speaker 1: instability problems. So you boil all that together and even
22:24
Speaker 1: if there is some growth, it's going to be slow.
22:26
Speaker 1: And really the bottom line is car companies to gain
22:29
Speaker 1: any kind of sales, they're gonna beating each other over
22:31
Speaker 1: the head to gain market share. There's not a lot
22:33
Speaker 1: of organic growth out there going forward, so they've got
22:36
Speaker 1: to find other ways to show investors that they're growing
22:39
Speaker 1: the business. So I guess, David, there's a broader question
22:43
Speaker 1: here aside from some of the trouble spots as far
22:45
Speaker 1: as the growth generators, which is how much of a
22:48
Speaker 1: threat our ridesharing services. How much have people ditched their
22:52
Speaker 1: cars altogether and just shifted to the Ubers and lifts
22:56
Speaker 1: of the world. It hasn't happened in mass yet, but
22:59
Speaker 1: it is happening. You're seeing some families that maybe have
23:01
Speaker 1: three cars go to two or two down to one.
23:04
Speaker 1: And it's not a lot, but it will happen, and
23:08
Speaker 1: especially as people continue to move to cities. Already the
23:11
Speaker 1: US more than people live in urban areas and that's
23:14
Speaker 1: supposed to get up to about and that's accelerating in
23:17
Speaker 1: China as well. And you know, if you live in
23:20
Speaker 1: a big city, having a car is just owners insurance
23:23
Speaker 1: tends to be really expensive, Parking is expensive and just
23:26
Speaker 1: kind of tough to find. So that that's why urban
23:29
Speaker 1: dwellers of often not head cars. And it's more people
23:31
Speaker 1: move that way. Uh, they're just going to give them
23:35
Speaker 1: up and not have them. So honestly, David, David, your
23:39
Speaker 1: understatement about how difficult it is to have a car
23:42
Speaker 1: in the city, I mean, really, it's aside from alternate
23:45
Speaker 1: side of the street, parking insurance, people bashing into your fenders.
23:49
Speaker 1: Oh my gosh, sign all episodes about George trying to
23:53
Speaker 1: find a parking spot. I've I've lost years of my life,
23:58
Speaker 1: Paul Safety exactly, so so of it. How about mass transit?
24:01
Speaker 1: Is that contributing to, um, you know, the decline of
24:05
Speaker 1: the car We saw this week in California where they
24:08
Speaker 1: ran into some trouble getting their railroad system approved as
24:12
Speaker 1: mass transit, making any inroads on the traditional auto ownership.
24:15
Speaker 1: Actually mass mass transit it's sort of one of the
24:17
Speaker 1: victims in all of this because it's more people go
24:20
Speaker 1: to Uber and Lift and other services. People who make
24:23
Speaker 1: pretty good money have been opting for those services instead
24:27
Speaker 1: because you know, hey, look, if you take an Uber
24:28
Speaker 1: our lift, you don't have to sit on a platform
24:31
Speaker 1: when it's ten degrees out or hundred and ten degrees
24:33
Speaker 1: out and wait for a train to come by. Someone
24:36
Speaker 1: picks you up on your schedule. So people have actually
24:39
Speaker 1: left those services the same way they've they've left owning
24:43
Speaker 1: their own car in some cases. So you see in
24:45
Speaker 1: some cities that they're actually putting in taxes on rides
24:48
Speaker 1: sharing companies like Uber and Lift and then funneling the
24:51
Speaker 1: money to public transit because it's it's become an issue
24:54
Speaker 1: that way. UM, you know you're going to see that
24:57
Speaker 1: battle play out. Public transit authorities do not want to see.
25:01
Speaker 1: They don't want to go into a lost position because
25:03
Speaker 1: everyone's going to Uber and Lift, and then the cities
25:05
Speaker 1: themselves don't want to see terrible congestion because people are
25:09
Speaker 1: getting those cars. And look, this is one of the
25:11
Speaker 1: many mitigating factors for peak car. If people give up
25:15
Speaker 1: owning a car to take Uber, and if you're going
25:17
Speaker 1: to need more Uber and Lift and way Mow and
25:19
Speaker 1: maybe GM cruise cars and you know services we don't
25:22
Speaker 1: even know exists yet, it's more of those coming to play.
25:25
Speaker 1: You're going they're still gonna be building those cars. They
25:28
Speaker 1: just might get Fox coned into building the hardware and
25:31
Speaker 1: you know, instead of selling the services. Fox kind of course,
25:34
Speaker 1: it's a company that makes your iPhone and Apple makes
25:36
Speaker 1: all the money off the content. So David, just real
25:39
Speaker 1: quick here, I'm wondering. So we may not be heading
25:41
Speaker 1: for peak auto, but kind are. Okay, so we are,
25:45
Speaker 1: but we're not heading for like a nose dive where
25:47
Speaker 1: autos go out of fashion and nobody drives anymore necessarily,
25:50
Speaker 1: at least not in the next couple of years. Are
25:52
Speaker 1: we hitting their peak truck in thirty seconds? The idea
25:56
Speaker 1: of you know, perhaps are just too pricey and they're
25:58
Speaker 1: just too many of them out there. Oh well, that's
26:01
Speaker 1: a tough one. I not yet, but we're going to
26:05
Speaker 1: get there before too long. Because the average praise of
26:08
Speaker 1: vehicle is over thirty six thousand in the US. That's
26:10
Speaker 1: a lot of money for a lot of people. Yeah,
26:13
Speaker 1: all right, David Weals, thank you so much for being
26:14
Speaker 1: with us. David Welch is our Detroit bureau chief for
26:17
Speaker 1: Bloomberg News. Thanks for listening to the Bloomberg pen L podcast.
26:21
Speaker 1: You can subscribe and listen to interviews at Apple Podcasts
26:23
Speaker 1: or whatever podcast platform you prefer. I'm Paul Sweeney. I'm
26:26
Speaker 1: on Twitter at pt Sweeney. I'm Lisa bram Woits. I'm
26:29
Speaker 1: on Twitter at Lisa bramw wits. One Before the podcast,
26:32
Speaker 1: you can always catch us worldwide on Bloomberg Radio.