Lululemon Sprints Ahead on Innovation

how would you categorize this company? I mean, is it up. Yes, it's definitely upper end ath leisure. And so it did report earnings yesterday that came in a lot better than expected. So it does kind of make you wonder what does that say about the trajectory of the economy right when people potentially are still spending upwards of over one hundred dollars also of this athletic wear. Let's take a closer look. We have Bloomberg Intelligence Senior analyst Poonham Goyle. She's in

Las Vegas, and Zachary Waring is with us. He's an analyst at a cf ARE, a research joining from Williamsburg Virginia Puno. Let me start with you unpacked the numbers that we had yesterday after the bell from Lulu, how would you characterize them? Overall? Very very strong, especially on topline. You know, their sales came in ahead of their own estimate and concentsus growing thirty percent growth, margins word down

but still pretty encouraging. And the inventory is high. Yes, fifteen percent the year over a year, but still you know they're bringing that number to Really I think it was key here was the guidance. The guidance came in well ahead of expectation fifteen percent growth for the year and eighteen percent for the first quarter, versus conscensus in the low to mid teens. So I think you know, the key takeaway here is that Lulemon did well in before its quarter, but it's just not the four its quarter.

They're expected to continue to do well in the coming year, where the math economic environment is a little bit uncertain, right, you don't know and where consumers will pull back, but it doesn't seem like they'll be on athletes or anytime soon. Zach. I want to bring you into this conversation because as far as looking ahead and its outlook, what are you seeing there and where are the promising signs and where there's still some weakness as far as when it comes

to this as leisure maker. Yeah, thanks for having me, Jess. So you know, we really like Lulu Women, you know, we think it's a great company, really strong brand. We do have an issue with inventory still, it's still a little bit elevated. So over the past three years, you know, inventories up forty one percent annually, which is much higher than the sales up twenty seven percent over the same period. So we'd like to see that down below one point

three billion by the end of the year. If they can get it down to one point three billion by the end of the year, we say that's pretty much in line with where it should be. So, Zach, does that necessarily mean cost cutting? No, so we yeah, I think it. They'll have to have some promotional activity to get ready of it. I think part of it will

be they'll order left. They're doing that now that they did that in the last quarter, they ordered you know, less than they normally do before the holidays, and then you know, ordering less for spring, you know, because they have a large they say almost fifty percent of their inventory is core inventory that they can sell year around, so you know they've got a little bit of work to do on inventory Outside of that, though, obviously the brand and revenue growth is unmatched in apparel retail, so

we do like shares. It's just it's tough to get really bullish with inventory levels aside and put I wanted to bring you back in because looking at Lulu Limon stock this year up thirteen percent, but when you draw it out over the past, you're kind of hasn't gone too far. But I mean, who do you consider to be more of a competitor when it comes to Lulu Limon, And I mean, how were some of its competitors holding up compared to how it has sure, So you know

one competitor that come into mind is Nike, right. Nike clearly is also making a big push in two I think more stylish, right, because they both fell active where But where lu women kind of wind is on the styles and the comfort and the fits. So we've seen

Nike make a bigger push especially with women. Luleman does have a men's business that is planning to double, but it's on the woman's side where it really resonates really well, and Nike has been pushing up its women's businesses all so I think both equally focused on driving sales about leisure, with Nike making a big push on woman and Lu

women making a big push on men. So zach to what extent is their risk and the companies like Lulu getting it wrong when they look at the outlook that the macro could turn south so quickly and impact all categories of retail that the market may not fully appreciate at this point. Yeah. So you know, looking at some of the other apparel retailers in their fourth quarter and their guidance for twenty twenty three, that comes in a

lot lower, but that's to be expected. So Lulu has been growing, you know, at twenty five plus percent now the last three years, like I mentioned earlier, So that would you say, that's a pretty mature market though for them, I meant of that growth rate sustained over time, at some point you hit a wall. Yeah, Well, so they're they're expanding into China. So they had thirty percent revenue growth in China this quarter, fifty percent on a three

year annual basis. So China growth is strong, and that's kind of where they're looking to get a lot of their high growth internationally, but China specific. Management talked about that on the call a lot, you know, and we think that's possible. It's obviously got its risk in China obviously with the government and how they handled that, you know, us businesses, but you know, we think it's it's doable

for them. You know, they guided for fifteen fifteen percent revenue growth in twenty twenty three, which was in line with what we expected. You know, we think maybe not quite twenty five percent annually for the next few years.

The fifteen percent sounds pretty much in line. Hey, Puonam, I want to get your thoughts as far as when we were just talking about this, Doug and I, as far as the tell this could mean for the economy when you see Lululemen's performance versus when you're thinking about say, completely different retailers. Right when you're looking at so the Walmarts of the world me sees targets. What does Lulemen's performance say it's for us, what it can means for

the trajectory of the economy. I think it comes back to the product. Product is king when you have the right products you will sell it when you resonate with your customer, or the customer will keep coming back to you. Those are the brands that are winning today in retail, and lu Lemon is clearly making inroads with its customers. Also, you know, it's still a small company when you compare it to someone like Nike. L Lemon is expected to grow to twelve billion dollars by twenty twenty six and

top line Nike almost four times outside. Right, So when you talk about runway, is there a runway for lule Lemon to expand? Absolutely, and real runway is internationally as you just heard about China and also digitally, I think I think you know, those are two big opportunities for

lu Lemen to keep plowing through and being really outside strowth. Zach, we were talking earlier about inventory levels being slightly bloated, the need to kind of cut prices to move that product out in terms of cost cuts on the manufacturing side, Is this something that the company needs to address to you. I don't know to what extent they're exposed to manufacturing China. Maybe they're more diversified, maybe they're in Vietnam right now,

or even India. Is this something that you think has to be top of mind for company management, getting a more diversified supply chain in place. Yeah, so Lululum it's got a pretty diversified you know, logistics system in place. You know, we think that you know, they're out of Canada. Obviously they've got manufacturing all over the place, but they're high end, so they're not so they're not too worried

about that part of the business. You know, managements talked a little bit about not they don't have a lot of promotional activity, so they're they're probably going to just order less as my guests the next few quarters until that inventory comes down. But you know, management, the CEO talked about it in this quarter that it you know, inventory wasn't an issue, so he doesn't see it as an issue, even though you know, we think it's probably

still a little bloated. You know, they do grow into their inventory usually, but it's still even for Lululemon, Elevated and pun. We only have about a minute left, but I want to get your thoughts going back to what I was saying, it's for the trajectory of the economy. I mean, can we have a potential recession when consumers are still spending on discretionary items like Lulu Limon No.

I think if we actually go into a meaning fullback in consumer expending, the discretionary sector will too be impacted. Prior recessions have showed us that there will be a material pullback. The question is when does that full fullback come and what's really going to drive it? Its currently inflation and a falling savings rate, you know, a slight pick up, an unemployment, debt levels rising. It has a done it. So are we going to enter into a

deep recession? Then? In that case, I would expect discussionary fund to pull back even across app nature. Hey, Zach, very quickly, as stocks trading around three sixty two and change. Do you have a price target here? I did, so my price targets for twenty five. That's a twelve month

price starry. Wow, So there's some upside, I'd say. So we have it as a whole currently okay, and it's strictly from an inventory standpoint, We're a little bit worried about maybe the margin compression in the next few quarters. Good talking to you, Zach. Thanks for joining us. Zach Waring there as an analyst at cfr A Research from Williamsburg, Virginia and Punham Goyle, Bloomberg Intelligence, Senior Analyst for Retail. Joining from Las Vegas. You're listening to the Bloomberg Business

Week podcast. Catch us live week afternoons from three to six Eastern Listen on Bloomberg dot com, the Ion Radio app, and the Bloomberg Business App, or watch us live on YouTube. Itchen a ride, whether it's Lift or one of its competitors, Let's take a closer look now at what is happening with ride sharing company. Our guest now is David Rischer. He is the CEO of Lift and he is new to the job from what I understand. David, pleasure to have you on the program. Thanks so much for joining us. Oh,

thank you, Doug. It's really great to be here. So the challenge is that you're facing right now is a ride sharing company when you're dealing with a rival like Uber that has such a large footprint. First, give me your view of the macro. How do you see things

right now? Look, the macro is we're number two. And here's what's interesting is even being number two is still a big deal, by which I mean, you know, hundreds of millions of people, you know, hundreds of thousands of drivers, billions of dollars earned over the last you know, fifteen years. So it's a big category. This is a trillion dollars

plus category. But we're number two, and so we need to fight pretty hard, and we need to remind customers we're going to pick you up on time, that we're going to charge you a price that's you know, in line with what you would get with the other guys. Are we're going to drop you off on time, and really kind of focus on those basics to try to

turbo charge our business again. And I know you're officially taking over the chief executive role on April seventeenth, and you hinted yesterday's to some of our colleague leagues on Bloomberg TV that the sale potential sale for Lift you're saying, was potentially off the table. So I want to know what is the path moving forward? What is your outlook here as far as how to turn things around. Yeah, I mean to be clear, it wasn't so much that

it's off the table. It's simply not our focus. You know, people buyers come all the time, and they know kick the tires and so forth. But from our perspective, the best thing we can do right now to maximize value for our shareholders is really build a great, great business. And it really does start with those basics. And if you compare our strategy to Ubers for a second, you

know they've sort of gone this diversification route. You know, it sort of made some sense within the pandemic when rod share was so far down, but with rodshare coming back so strong, and it really is coming back strong. And I'm not making an earnings projector any crazy thing like that, but simply to say that, like people are getting back out and and kind of together again. So with that happening, you know, you want to ask yourself a question, do you want to be focused on that

opportunity or not? And we think being focused is great. We don't want, you know, tun a sandwich deliverers, you know, also picking people up. We think that might be an interesting business model or at least an arranged marriage that worked for all for a while, but it's not going to be how we go. So you've got a strong background in technology. We're at Amazon for a while, you were also at Microsoft. Do you understand well the architecture

of some of these platforms, these technology systems. Is there a way that Lift innovates its way out of this situation right now to try to capture more market share. And let me just throw one thing out, is it time to rethink dynamic pricing? Just as one point. I mean, that's a super interesting question. I won't go into the details on that, but for sure, there is an enormous

amount of innovation left. And I think this is it's such an important point, and it gets forgotten because we think that somehow we're on the tail end of this. We're at the beginning of the ride share journey, and there are so many ideas here that our teams are coming up with on ways to really differentiate. I'll say, if you talk to drivers, I mean, aside from saying they love the control over their earnings and love the control over their time, they'll also say they really like

lifts platform as a driving platform. The mapping is easy. It tells you where to pick or passengers up, where to drop them off outside the street, and so on and so on. These are kind of under the surface things, but there's a lot of innovation left in the market, for sure. So one of the things we've been talking a lot about and I'm sure it's fun of mine for you, the role of artificial intelligence and everything that

we're doing these days. Is there a way to give the consumer right now in a ride sharing space greater preductability in terms of hooking up with a ride so that maybe wait times are reduced. Are you thinking about ways to use the latest technology to service the customer, to service your client in a way that can maybe enhance the experience, Yeah, but also less in the way

time as one example. Absolutely absolutely, And I'm really glad you brought it up, because, Yeah, I mean, imagine a world where you tell us a little bit about you know, the trip you're going to take, maybe that involves going to the airport and when you're going to come back,

and we sort of arrange everything around that. Right We pick you up when we know you need to be picked up, and we don't, you know, threaten to leave as soon as we're you know, arrived at the door, you know, we drop you off with the airport, and then of course we know on the other side you're going to need a ride too, and you're gonna need to ride to the hotel, and then you're going to do that whole thing in reverse, you know, maybe in

a couple of days. So and that's basic, but even there, that just shows you how rides your service is going to really make themselves a lot easier and frankly more kind of compelling over time, and that'll be a big focus of ours. And David, you did bring up Uber earlier, and so I was curious as far as because with Uber and they have Uber Eats, it's typically more of a high margin business. You haven't when it comes to

live expanded into those types of segments. I'm curious if that's something you're thinking about, and if so, what those plans could potentially be. Yeah, I mean again, our focus right now really will be on the right stare basics, because we think there's so much to do there. But

it's interesting. You have to be, you know, cautious when you think about, like every the grass always looks green on the other side, and so you think, you know, maybe the food deliveries a higher margin business, but then you feel the onion back a little bit and you start to see you know, Instagram, you know, photos of you know, seventy two dollars deliveries for you know, a couple of slices and you think, gosh, someone's not really

working super well there, particularly when the drivers are not saying I love the experience of the food delivery. I double park, I get a ticket, you know, maybe I get a tip, but I don't really get very much in base pay so compared to Ritter Even so, I don't know. I think a lot of this is much more to be determined than it looks like right now. And I think when we look back in five years, we'll think, gosh, you know, what an interesting early stage

that those companies were in. And now look at how how much more, just how much better they've they've gotten because they've really focused on us as passengers and drivers. David, we're talking to you from here in New York City where the yellow cab drivers when Uber showed up into this marketplace, we're really struggling, and I'm wondering whether or not a similar strategy may be adopted by your company.

When you talk about trying to grab more market share, do you purposely undercut a competitor to try to capture more market Is that part of a strategy too. I don't think that's a very good strategy to be honest, because that sounds like a race to the bottom, and that means somebody gets squeezed and that ends up being the drivers, and that's not where you end up with

a healthy market. I think it's better to think a bit as you know, if you have two or three players in a market, you kind of want them all sort of fighting them out on kind of best behavior, you know. And I say that because you know, you really want as a consumer and as a driver, you want some choice, and you don't want a knife fight that ends up with one guy in the end having

a monopoly. I think that's very, very dangerous. You know, we've sort of seen what that kind of looked like back in the old days with taxis, where maybe that wasn't the service the people really loved. And I don't think anyone really wants to go back to sort of a one party system. David, Are we going to continue to see higher prices on the lift app? I hope not concern there as far as how to grapple with them.

I mean, look there, you know, of course our costs, you know, go up, you know, just like everybody else's. But at the same time, we're very aware of the macro environment, and the macro environment is really trying to push the other way. In other words, of consumers are saying, gosh, we don't have a lot of extra money right now. You know, you were talking about this a little bit before, and and it's a real question, you know, how flush your consumers feeling versus how you know, sort of more

constrained are there economically. So we're trying to set ourselves up that we can offer a great value and not to the extent we can not pass those sorts of cost increases along to customers. David, very quickly here, I just need you to weigh in on autonomous driving in about thirty seconds. Too much hype here or or do you believe it's the future? Too much hype now? But it's definitely the future. It's not happening tomorrow. It's a

very complicated problem. And even optimists from two or three years ago are now being you know, having their own expectations reset about what's possible in the near term. But man, I mean I have ten years from now. Imagine you know it's a karaoke experience. Yeah, I mean, there's so much money you can have where person in the front seat and not to be driving, can be showing you around town. Boy, I wonder if I'll live that long. David,

Thank you so much. Yeah so, David Rich, CEO, the new CEO for Lift, joining us here on Bloomberg Business Week. You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern on Bloomberg Radio, the Bloomberg Business App, and YouTube. You can also listen live on Amazon Alexa from our flagship New York station, Just say Alexa play Bloomberg eleven thirty. We are back

here on a Bloomberg BusinessWeek. You know, I think we talk a lot these days about taking care of the planet, the environment. What does that look like when it comes to building products. Well, Treks is a company, a leading producer of outdoor decking and railing that has a sustainable model, and the company's CEO, Brian Fairbanks, joins us now ian the Bloomberg Interactive Broker Studio in New York. Thank you so much for being with us. Give me a history

of this company. How did it come into being? It's really unique about Treks is our sustainability journey started over thirty years ago when our founders looked for ways to use At that time, it was excess bread bags and waste wood and understand how could that material be used in a way that could generate value for the company, And they landed on a product that ended up being our first generation deckboard. And to this day we still

use many of those same principles. We mix the polyethylene, plastic and wood together with a number of other additives to turn out a world class deckboard. And you've been at the company for close to do decades now, right, started back in two thousand and four. I've seen a lot over those years along the way, obviously the two thousand and eight recession that we've gone through, but a lot of growth since that time and a lot of changes in the organization, the vast majority of them for

being the better. Talk to me a little bit about the process of making this composite. You mentioned it involves polymers, synthetic polymers, and wood. They're combined. I would imagine that there is a bit of mulching when it comes to the wood. Things are heated and compressed. Is that pretty much how it works. Yeah, Simplistically, we're taking the wood, the plastic, mixing it together, adding heat to it, adding some additives to make sure that we're going to have

the longevity. We have an up to a fifty year durability warranty on our products. Through that it goes through an extrusion process, We cool it, we cut it, and then it gets packaged. And how exactly because you were talking to us about wood decks versus going into composite decks tell us a difference about how that works. Yeah, so the great part about trecks composite decks is going to be the reduced maintenance and of course the lifespan Today,

pressure treated lumber is not particularly high quality. So your deck that you build you could last ten years, maybe fifteen years, depending upon the environment. But also every year in the spring, you're going to be spending time cleaning, standing, staining the deck, and nobody wants to spend their valuable time on their outdoor living area doing those sort of things.

Bloomberg Intelligence, our in house team of analysts and researchers, was pointing out that growth in composite decking has slowed lately relative to the growth that we saw last year. When you look at the market right now, whether it's adoption for the home kind of fixer upper that goes to a store like a Lows or a home depot, or it's the professional contractor that's looking for materials to use in a lot of the renovation projects. Where is your focus right now? How do you want to grow?

We continue to see good activity both from the DIY channel as well as our pro channel and speaking with their contractors. Their backlogs moving into the season are all at reasonable levels. They're not elevated like they were the past couple of years, or they could have been out twelve or sixteen weeks, but they're more normalized. We're they're

four to six weeks. That's healthy for the marketplace. And we're still seeing health especially at the high end of the market, and most of our customers do tend towards the higher end and thinking about decks, especially in the pandemic right where people wanted to build more of them. But then we saw the surge in lumber prices and so that was a hectic for a lot of people and obviously very pricey, and then those prices came back

down on the lumber side. But it was curious your thoughts on with your business, how it's doing and what the tell is about the economy right now. Yeah. One of the keys when we started really going after the wood conversion opportunity was launching a product that was two times the price of wood, also with a trade up opportunity to a product that has a little bit better aesthetics for about three times the price of wood. And with that product, we saw the opportunity to be able

to bring more people into the marketplace. It's something that we've really been driving since twenty nineteen and we have a long runway with that. When it comes to the esthetic, is that something that you have to overcome? The resistance to a product that may not look like a natural wood or some type of wood product. Has that been kind of a point of resistance. The vast majority of the market loves the look of composites, and every time we come out with a new product, there's more and

more realism with wood. Beginning of this year, we launched our signature product. We launched it on a regional basis and this product has all of the performance characteristics everybody has come to expect with treks, but has that real look of hardwood. If you were to take a piece of epay, which is a Brazilian hardwood from endangered rainforests and put a piece of Treks signature next to it, you'd have a hard time telling the difference. So there

is a market that's clearly looking for that esthetic. Something I was curious about as far as the housing component of this, is it more people are building new depths for existing homes that they're already in or as far as comparing that to say new home builds, and that's something that they're looking for. The vast majority of our market is repair and remodel ninety to ninety five percent.

So the new home build side of things obviously is a key indicator from an overall economic perspective, but the primary driver for our business is that repair and remodel sector manufactured here in the US. Right, how are you doing that? All of our product gifts manufactured in Virginia and Nevada. We also have a third site that will be coming up probably in the twenty five twenty six time frame down in Little Rock, Arkansas. We've always been

a US based company. We can be very efficient in our manufacturing production here, and we also have very unique ways of using the recycled material. It's not something that every organization can do. We have built a culture which accepts a highly variable raw material stream and then converting it to a high value end use in our deckboard and railing any thoughts about going offshore, No, not really when we from a manufacturing perspective, everything's done here in

the US now. Longer term, there's a great opportunity international marketplaces. Today we sell in over forty countries, but the vast majority of those overseas sales are done into mainland in Europe as well as Australia. We look for countries that have a higher GDP and an interest in outdoor living, and we're really just in the first inning of that opportunity. Eventually, when I'm back here in a good number of years,

we'll be talking about international expansion. So when it comes to sourcing raw materials, let's talk to synthetic polymers, whether they're used plastic jugs, things that are being pulled out of the ocean by the bucket load. I mean, is there a a network that you're tapped into right now, whether it's with some of the trash hauling companies, whether it's with local municipalities that have been involved in these recycling programs that maybe up until this point, had been

exporting a lot of that to China. For us some kind of recapture. How are you tapped into the network for let's say the synthetic polymer our sourcing is home built, so we are buying direct from the generators. So we'll have a contract with a parent organization and buy material out of their distribution centers or their manufacturing centers. For example, material manufacturing materials that have protective films that are included on it. They'll pull that film off, throw it into

a Baylor. Once they get forty thousand pounds, we'll go ahead, we'll pick that up and we do that all across the country. It's very good to talk to you. Thank you so much for being with us. That's Brian Fairbanks, the CEO of Treks, joining us here on Bloomberg Business Week. You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six. Listen on Bloomberg dot com, the iHeart Radio app, and the Bloomberg Business App,

or watch us live on YouTube. I'm brother Mac a journal Yeah, but you let me drive? Oh no, no, no no, no, honey, please I'll do the riding revels. I want to drive. It's good question. This is the drive to the closet commune. Thank well, up down on Bloomberg Radio. Yeah, we have about eighteen minutes until the closing bell the Wednesday session. Fair amount of appetite for risk, and we're gonna take some of these numbers apart with our guest Bill Smead.

He is the chief investment officer at Smead Capital Management. He joins from Scottsdale, Arizona's bell it's always a pleasure. Do you buy into this rally today or not? Well, you know, we own the oil and gas area and those stocks have had a pretty good week this week.

But no, I would say that I find it illogical that the companies who are the vendors to the startups and the private equity people that are most damaged by these bankrupt the bankruptcies in the bank world are tied very closely to what vendors feed off of the venture capital and private equity world. Guessing you're not buying the dip on these pullbacks that we're seeing in banks, whether regional banks in particular, Well, no, the bank issue is

a separate issue. Created by the FED tightening, and we happen to think at some point in time, the FED will blink and they will not want to go through the amount of economic difficulty it would take to kill the inflation that was created by the Treasury borrowing too much money and monetizing it. So that's that's a separate subject.

What really is more important to this bear market that started in late twenty one is it's got to cure the sins of the prior financial euphoria episode, which Charlie Munger called the biggest he'd ever seen because the totality of it. But based on what I'm hearing you say, you don't expect that you expect the FED to capitulate and have to cut Is that before the end of the year. And then if we are looking at rate cuts, is that a reason enough just to trade the market

and to go long US equities? Well, not by index basis, we believe it's not. You know, there's not very much upside in a bear market rally from here, because you had one heck of a great bear market rally. I mean, the things that went down the most have gone up the most, but they're up to way below where they started. So that's what bear market rallies do. They're trying to suck people into believing that you can get the old

game going again. So what are they buying. They're buying fang stocks, They're buying you know, they're buying very aggressive stocks and looking for imagining that that we're somewhere close to the bottom of a bear market with some of the highest equity ownership of households in history, and just trying to put Humpty Dumpty back together again. Yeah, if you're looking under the hood for the S and P five hundred for this quarter, the infotech index up about

nineteen percent over the past three months. Also communication services up about seventeen percent, and then of course right after that, consumer discretionary up about twelve percent in that span. So, Doug, I know you were highlighting as far as when it comes to specific energy stocks, But what are your top picks right now on the energy side? Bill? What do

you like energy? Yeah, of course, we're a very large owner of oxy and we love the fact that Warren Buffett is coming in at higher prices, way higher prices than us. We think he's on the right track. We like Conical quite a bit. We like Oventive and Apache as well. Those stocks are being penalized by having a

certain part of the revenue coming from natural gas. And unless something is missing, there's only two dollars downside in natural gas because it trades two dollars, So there's two dollars of downside, and I think the high was ten dollars. So somewhere in here, it's going to get cold somewhere and the supply of natural gas that has flooded the

market will will fade. And it's one of the cleanest forms of energy, so it actually it kind of fits in with the you know, the environmental movement to use natural gas, and that's one of the things you make electricity out of in California. So would you be attempted to play a fixed income right now, particularly in the corporate space you mentioned energy, I'm wondering whether or not the credit markets provide you some opportunity for energy names.

We're stock pickers only and are not asset allocators other than deciding which stocks we want to own. But I will say this, if we do have a recession and long term rates continue to stay low, the spread between the ten year Treasury and the thirty year mortgage rate is completely out of whack right now, there's like nearly

three hundred basis points spread between the two. It would be much more normal for that spread to be one point seven percent, and if that were the case, you'd have about a five point three five percent mortgage right now. And we own Horton, LNAR and NVR, three of the five largest home builders. There are ninety two million millennials out there and most of them would like to buy a house if they could get a mortgage below six percent.

And we think we're headed there. Well, if the economy is headed to a level where the feed is forced to cut, and I'm wondering whether or not people are going to feel like buying a home. No, no, no, you just made the classic mistake. You never feel like buying a home. You buy a home because you it's

a necessity. When there's ninety two million millennials, and even though they're different many ways than past generations, they are getting married in droves last year and this year, which means they want a house and so far, so that is a that's kind of an urban myth that that ninety two million people aren't going to provide a lot of demand where it was seventy five million boomers and sixty five million Gen xer. So even if things are different than they used to be there we have a

huge lack of housing. That's the biggest economic need we have right now, is that an inexpensive carbon energy. One of the things we've been talking about in terms of the impact of this meltdown and some of the regional banks's tighter lending standards, is that not going to carry over onto the mortgage side as well. You're going to worry about financing of some of these homes. No, Because

here's the great irony. We call this a rich session ri C S s io N. People below the top twenty percent of incomes don't own much in common stocks, so when that gets bashed, it doesn't change their life much. And wages at average and below average people are soaring. You name any restaurant or any business establishment you interact with that doesn't have a sign up say hiring at the best wages you've ever seen at the entry level in your lifetime, and I'll put in with you all right,

final thoughts. You know, I was taking a look at the XHB, the ETF tracking homebuilders in the SMP five hundred. It's up about ten percent this year's It's interesting when he's talking about Lenar and some of these other names, it seems like that trade is in. But Bill, I would imagine you're going to remain long that trade for a while longer, right, very quickly. Yeah, that's a that's

a five to ten year thing we're working on. And again there's plenty of corrections along the way in what we do as well as the other parts of the market. The difference is things we don't are not coming out of a ten yeal Okaymnia. Bill smeat from a smeet Capital Here on Bloomberg Business Week. This is the Bloomberg Business Week podcast, available on Apple, Spotify, and anywhere else

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