Mattel CEO Says SpaceX Deal Was Unexpected

You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube. Search Bloomberg Global News and shares A matteler trading lower today, down more than six percent, after the company said second quarter margins shrank due to inflation, higher supply chain costs, and royalty expenses. CEO Kries was on with our Bloomberg TV crew earlier and they talked about um how the company that did keep their forecast intact. Enon Cries as

chairman and CEO of Mattel. He joined us on the phone from California right now. Enon, great to have you back with us. How are you right, TI? Hi? Carol? Right to be here we'll bring us to to the most recent quarter and what you're expecting for the rest of two because when when we've been able to talk to you over the last few months, you've been really confident that you can manage the supply chain challenges in the inflationary environment that we find ourselves in right now,

that's right. So, first of all, on the quarter that we just completed, these were excellent results from Matail, without eight consecutive quarter of top line growth. Our profits also grew significantly, with adjusted operating income up despite high inflation and following a record first half. We expect to continue growing in the second half and are planning for increase in consumer demand in the holiday season. So all in all,

we're very happy with the position we are in. We expect to win markets you are going forward, and we reiterated fullier guidance for strong top line growth, um increase profitability, a higher gross margin. UH and all of this is in spite of significant inflation and negative currency impact. So are you like, come on, investors, you still got it wrong. Look, we have very focused on managing the company. We have been growing now consistently. We're executing on our strategy we have.

You know, we wren market share for two years in a row, and we expect to win market share this year as well. Our supply chain is in very good shape. All of our own and operated factories are fully fully operational. Product is flowing in, we're seeing we're expecting a second half retail sales to be above the first half levels.

We're seeking the industry growing as well well. So, so you know what happened because one of the things that we Tim and I have always after we talk with you, were kind of blown away by your ability to be flexible with supply chains, move them ahead of kind of some of the constraints that we've seen in the last

couple of years, and manage it really really well. So what happened in the last quarter, because I think it's safe to say that what is freaking out investors and it's been a top theme for all us here at Bloomberg, is what's happening with margins? What happened that your margins shrunk? That maybe even caught you guys by surprise. No, the margin impact was expected. It was factored into our guidance.

We talked about it at the beginning of the year. Uh, and if anything, it's getting better actually because we did revise our guidance on gross margin UM, uh, not by much, but nevertheless a positive you know, uplift. We're able to upset currency negative currency impact and maintain and reiterate our guidance for the full year. So the margin, the margin UM reduction was very much expected and and the set you know, factored into into our guidance at the beginning

of the year. Over time, over time, we do expect that the combination of pricing and cost savings will more than exceed the impact of inflation and contribute to margin expansion. And we do expect that we do expect inflation to

moderate in twenty three. But you know, we also reiterated our goals for three where we talk about high single digit growth and constant currency adjusted operating in a margin of six and continue to grow our earning for share and exceed at our ninety So we're staying the course, continue to execute our strategy and seeing seeing it in the numbers. Give me an idea of what you're seeing

with pricing power right now? Where are you able to raise prices so that consumers will continue to pay but you can better cover increasing costs on your side without destructing demand, as pricing is one of the options we consider in times of inflation. Uh. Sorry, this is not obviously unique to Mattel or unique to the toy industry. But we've said before, and we're being very consistent about it, is that when we raise prices, we always keep consumers

in mind. We're being very thoughtful and strategic and are committed to maintaining the highest quality and best value for consumers. We haven't seen, um, you know, any negative impact for the pricing actions we two class year. We just took another action that will become that will be factored into our numbers in the second half. Um. And this is something that we previously announced, So this is not new news, and we haven't seen a negative impact. You know. These

actions are very method calling thought to. So what's selling? I know in our Bloomberg story that you guys I think said on the conference call last night that you guys were seeing some softness and sales of higher priced items such as a Barbie dreamhouse I think, which costs around two hundred dollars, having owned one when I was younger. Um, But anyway, so what is selling? What is not where are you seeing maybe some consumer sensitivity because of the

overall inflationary environment. Well, in the in the second quarter, we saw comprehensive growth, uh, you know two in constant currency. Uh, we were up in double digit strong double digits in North America, Emia and Latin America. We grew in all of our reported categories and in three in our three power brands, Barbie, Hot Wheels, and Fisher Price. So the performance was pretty pretty comprehensive with some really strong numbers.

We did say that Hot Wheels, as an example, is on on track to achieve its fifth record year in a row. Uh. Barbie is just coming off an all time high, and we said that we expect to be sales for Barbie to be comparable. So we're holding a very high bar right, and a pretty pretty strong performance across the board. So we were talking about the Barbie movie on the call, and I know we've talked with that for you before. I think for what I've understand

is that it's wrapped in terms of principal photography. What we've been wondering and I'm going to steal a question that actually Tim brought up on our call, but he said, you know, the point of do you anticipate making more money UM from the movie and your partnership on the Barbie movie, or more from the lift that the Barbie brand gets thanks to the movie. We absolutely see this

opportunity as as incremental to our toy business. Our strategy to capture the full value of our IP is about participating in highly a creative business verticals that are adjacent to the toy industry and are also driven by big franchises and big brands, but we want them and expect

them to be a creative in and of themselves. So the partnership or you know, the Barbie movie and the the the partnership that we have with Warner Brothers UM is such that we have a meaningful economic participation in the Barbie Movie as well as for that matter, all of our movie projects. We do have economic participation, and of course we understand that in success there will be a benefit for the toy business, but we do expect the economic participation outside of the toy aisle as well.

What does meaningful economic participation mean? Does that mean that that you are that Mattels a producer of the movie, You're putting money into the movie, or does it mean that you get a percentage of ticket sales. It's uh, it's different economics, different types of participations. But we do not found the movie. We do not uh, you know, participate in in movie financing. This is not our expertise

and not our business. But we do participate economically both as the I T owner, as the owner of the brand, and as a producer. We are a producer on all of our projects. Do you get a piece of the box office? You know, we haven't been specific on the commercial terms, but box office and research are part of the equation of uh of of you know, of typical participations. Hey, can we talk to you about SpaceX. We've been talking about this story all week long. UM, tell us about

the collaboration. It's a multi year agreement that Mattel has announced with SpaceX to produce toys and collectibles. Yeah, this is an exciting partnership to create space exploration to and collectibles under the Matchbox brand. The toys will come out next year. The collectible uh toys will be available on matel creation or direct to consumer side. And this is really about um, you know, scaling our portfolio. UM, it's about innovation, It's about thinking out of the box and

bringing new partners to the toy aisle. And this was one that people were you know, didn't expect and didn't see coming. And it is exciting because we are partnering with an exciting company in an exciting area. But you know, more than this partnership specifically, it is about how we continue to scale our portfolio work to position matel as a partner of choice major IP owners. Is there going

to be a figure? That's what I want to know. Uh, it's uh, it's you know, obviously this uh, you know, we don't go into that level of resolution on the product side, but we always do to continue to innovate and delight our consumers and do it in fun and creative ways. I would imagine there is demand for that, so I guess we'll have to wait and see you. I would buy in Elan Dahl. I just think that

would be kind of fun. Um Enon, thank you so much once again just giving us a nice junk of time and really leaning into the business and letting us know what's going on. Inenon cries. He is the chairman and chief executive officer of Mattel. Mattel Shares under pressure but as we mentioned, they are still up for the year. Here in two. This is Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio.

It's a new way show Bloomberg Business Week Magazine at on newsstands, online and of course on the Bloomberg terminal. And in it is a story about the AI platform behind a Jeff Bezos back startups Vegan Burger. So I feel like him that there are so many big Macro themes of the day in this story said big Mac, which kind of makes sense. Did I say big big Macro? I heard you know, so I hear big macin next

I'm always talking about food, He's always. Augusta Suriva is supply chain reporter for Bloomberg New She's with us right now in the Bloomberg Interactive, a broker's studio. Augusta, good to have you with us. What is this AI platform? Um with not company? Essay, thank you for having me on. And it's interesting that you said big Mac because they actually have a big deal with Burger king um. But this company is actually a Chilean start up. It was a big Mac McDonald's or Burger King, Big Mac is

McDonald's Whoppers, Burger King. But there I'm getting picky, But they're they're kind of the counterparts of the restaurant. You gotta know your burger's carols. These are not burgers. They're not burgers literally, they're made out of potato chips. They're made out of sunflower oil. Everything that you would not expect to see on a burger is there? Okay? The problem though, is sunflower oil a little hard to come

by these days? Yes, And when you're making alternatives to burgers, that's extremely needed because it goes on a third of all of the alternative burger out there. And because of the war in Ukraine and because all of the supply change shortages we've been hearing about over the past year, it's been hard to find. So what this company did, I mean, since they were already creating alternatives to everything, they just decided to make alternatives to the alternatives, right,

So that's how they came up with the idea. And how does it work? Is it good? And does it taste right? Or it like wow? That's the point. They just started trying it out and if it works out, that's the plan. They want to sort of like revolutionize the industry. But right now, what they're doing is that they're using the algorithm, which they call Giu Zappe. It's sort of a nickname, and they're trying to use that

to create on that somebody was in a lab. There was a little i don't know, to kill a going around and like, what are we gonna call this thing just or is there a reason behind it? There is a reason behind It's based on an Italian painter that would only paint using vegetables, So that's why there's the reason. Okay, So so I'm also imagining in my head like a little robot that kind of goes in and taste things and things to itself. Okay, this is what could be

a meaningful alternative. But we're just talking about algorithms at a computer, right Yeah, in a way, it's just a computer, but it's sort of scans the product and then it breaks everything down, either if it's a recipe or if it's an ingredient the product. So it looks at let's say a lettuce leaf, and it's like, so what's here, what are the molecules? What is everything that is here? So that they look at that and then they're like,

how can I recreate that using different things? Maybe lettice wasn't the best example because we don't actually need vegan alternatives to that, but maybe if you look at a burger, how do you take the animal out of the equation?

So that's what the algorithm does. I keep thinking of, like this incredible white borders right, like, and here's what the traditional thing is, and what are some things that we can use to substitute that maybe give it the same kick nutritionally or because the bigger story here and this is why I get to the big mac story. The big macri story is we are looking at a world that is getting maxed out, and how do we don't feed the people that are currently on this earth?

So how do we do it in the face of things like climate change that are really shifting where we traditionally farm and so on? So it's like, how do we do this? And and this is maybe part of the solution. Yeah, And that's exactly how Nacho was born. They were born not only to create alternatives. So it's not like oat milk that actually doesn't taste anything like milk, right, Their goal is to make alternatives that are good for

the climate. They're good for people who do not eat meat, who try to avoid that, but they also want their products to taste like the real ones. So their milk, if you go and try them, it's made out of pineapple juice, but still it tastes like actual milk. It's pretty amazing that they're able to do that. Augusta, I'm I'm wondering about competitors in this space. We talked a lot about Beyond Meats, publicly traded company. This stock has

been under a ton of pressure. We just had Dina Shanker on our program yesterday talking about the challenges that they're having with Pepperoni, and then if course Impossible Foods, which is still privately held. They sort of have their you know, secret recipes to try to replicate what the taste of a burger or animal protein is. Is this like a secret not a secret recipe, but is this like a secret sauce for this company, this algorithm to try to replicate it is? Indeed, uh, And that's the point.

It's a private company, so at this point we don't really know where they're going with that. They actually had plans to go public next year, but with all the headwinds. That might not be the case, um, but as of now, yes, that's their secret ingredient right there, Big Max Sauce. It's kind of the next step when we keep thinking about It's so funny we're talking about Beyond Meat this week, and like when it first came on the scene, it was like, Okay, this is the answer, right, defeating the world.

But this actually takes a much bigger picture, right and looks at all the elements and things, and like, how do we kind of figure out alternatives? Is that fair? Yes, it is fair, and that's what they're saying. They don't want to only revolutionize the one product. They want to revolutionize the industry. So maybe one day we're going to see that algorithm that jews app becoming the norm in the industry, but not right now. Yeah, exactly. It's got

some big money behind it, right. We talked about Jeff Bezos is behind it, Danny Meyer, uh, and a few others. Okay, so we talked a little bit about taste. I'm wondering about being able to do this on a mass scale. Carol alluded to the challenges of feeding the world in a previous comment to you, Augusta and I'm wondering how we do this in a way that solves the problems that we're seeing right now, not just hunger, but of course climate change and the and the emissions that are

associated with raising animals. Yes, and that's one of the reasons why we decided to take the supply chain angle for this story, right, because with everything that is going on nowadays, the disruptions, the war in Ukraine, it's so hard to find alternatives. And at the same time you have so much hunger going on. And when you think even the alternatives, right, even boat milk, the production of that,

it takes so much water to produce. So even when you think of because feel guilty because I love my totally, yes I do too. So that's the point, right, can we ever get this right? And I think that's what this company is trying to do. Create an alternative that is good, that is fair, and that doesn't take a lot out of us. Well, and if you can start to compare like A from B, from C from D in terms of different ways of either producing things and food the impact on the climate, you can kind of

figure out which is the most sustainable way. And also, you know, meeting the goals of feeding the world if you will, august to survive as she is supply chain reporter here at Bloomberg News. I love that we have a supply chain reporter so relevant and she's just awesome. She got to be on our team at quick Take for a few months as a rotator and we miss you, Augusta. You're listening to Bloomberg Business Week with Carol Messer and

Bloomberg Quick Takes. Tim Stinovic on Bloomberg Radio. A lot going on in the world of crypto, and what was interesting is we are seeing in some ways over the past ten days, investors scooping up about a billion dollars worth of crypto exposed companies as a cornd of report we've published on Wednesday by Vanda Tracks. So they were buying things Tim like Marathon digital coin based Global Riot blockchain. I mean, after the carnage, people are finding some opportunity.

At the same time, Carol, we're starting to see some legal action taken against people. Three have been charged in the first ever cryptocurrency insider trading tipping scheme. To get some information on this and more when it comes to crypto, we turned to Kathy Craninger. She's a former director of the Consumer Protection Financial Bureau, also vice president of Regulatory Affairs. That's sold US Labs. Cathy, great to have you back with us, joining us once again from Washington, d C.

How are you. I'm great, Thank you for having me back. It's definitely a busy time in crypto. Yeah. I want to start with this coin based news that three have been charged in the first ever cryptocurrency insider trading tipping scheme. Here are we going to start to see more legal action taken against those in the crypto industry. Well, this just demonstrates that this industry is in fact obviously regulated and subject to the law. And as was said by the U S Attorney, fraud is fraud. Um. So the

indictments are are fairly clear. Um. You know, obviously we'll see how the case carries out, but it is critical to see rules be enforced. And I'd also note that you see in the indictment that coin based had policies in place and was in fact monitoring the behavior of their employees, which again is what a responsible, um you know, market participant would do and what you would hope and

expect from them. So, UM, I think again, it just demonstrates that there are responsible actors in this space, and that the people who are engaged in wrongdoing and fraud should in fact space prosecution. Is it? Is it also? I mean, is there a silver lining to this in that it shows that the industry is growing up and it's essentially on solid footing in the sense that regulators are taking it serious. Now, I think that's that's that's true.

You see definitely a maturation process regulators understanding the industry better. But but as I said, if you go back to the lesson here, I think it really is you know, fraud is fraud no matter where it happens, um and that's something that I think is important. And there are absolutely new and novel things about digital asset markets and ways that we need to, you know, Taylor things to make sure that you're treating, you know, like activities in

a like way from a regulation standpoint. But some of these things, certainly are are things that you see across the board wherever there is an opportunity to make money and where people see an opportunity to you know, unfairly take advantage of others. I feel like it's not a

new problem We've heard this before, Kathy Um. So alright, So three Charge in the first ever cryptocurrency Inside are Trading, one of the most read stories in the Bloomberg gets an exclusive and it talks about the three Arrow founder story, huge story, once high flying hedge fund saying that they're bungled, crypto speculation, unleashed, cascading margin, calls on loans that should never have been made. So as more things continue to come out in different ways, but showing continued carnage, if

you will, in different ways in the crypto world. What are the key problems, the key vulnerabilities in the crypto world in your view, that need to be tackled by regulators. So there there are definitely things, as I noted, that make this space more unique in areas where there needs

to be some more conversation. I think the Lamas Jilabrand bill certainly is an attempt at getting to some of those gaps in a more comprehensive treatment in the US, And there are other bills too, obviously, Senators Stabino and Bozeman, are I guess on the um really about to introduce something and you've got the House bills to uh where there's a lot of activity and even uh an imminent stable coin um regime perhaps coming, and so you know,

that's that's all positive to see that bipartisan activity now again, whether it's something like that fifty digital asset bills and

you know out there or something. I mean, if you had to pick one or two things that you're like, Okay, this is what we've got to get down in order for this industry to really kind of grow legitimately and comfortably and securely, one of them is definitely you know, uh, the way we talk about at the taxonomy, the terminology uh stable coins of course imply but they are stable and that that certainly implies backing in reserve. And so that's a conversation that obviously the stable Coin bill UM

will will seek to address. And we're clearly new authority needs to be granted agencies in terms of requirements around that that really Congress is best place to act on.

I guess that's that's one example would provide. So help us play that out and what that would would look like, Kathy, because I've been thinking a lot about stable coins because of the you know, collapse of of of Terra, and I'm wondering if all would basically say, okay, well this type of stable coin is allowed, maybe one that uses cash or you know, commercial paper cash equivalents in equal you know, in terms of like what people pull out

of of tokens. You know, there's that an equal amount of money backing it up in a safe somewhere, on a balance sheet somewhere. But maybe the algorithmic stable coin

that's not okay. So I am definitely not going to get into the weeds on that because I think it depends on how these things are set up and certainly again putting the disclosures out there to the public to show what is in fact behind I mean, I guess I can say there are good actors in this space who are demonstrating that they are in fact backing their stable coins their tokens, and that they are uh you know again engaged where you can you can actually hold

the peg, and that people are actually getting the value out of them. And certainly for defy operations, stable claims are essential. Um so I think it really is definitely getting some of that out. I know, so that big debate is around me you know what what the role of banks in this, and so that is definitely a dynamic that the Congress is gonna is going to weigh in on. So, Cathy, I do wonder about something like crypto end or blockchain that it could really criss cross

a lot of walks of our world. So who needs to oversee it? Or is there going to have to be a couple of um major departments within the federal government that have to oversee it our or in the regulatory side of our government. Yeah, it's a great question, and I'd say it really is a whole of government approach. I mean, there were things that the President's Executive Order demonstrated that there are facets of this that affect um

certainly national security and financial crime. And then you look at all of the use cases for what blockchain can bring to any ledger process or or transaction process, and you think about healthcare and transportation and supply chain and so there are definitely a lot of different applications for the technology um and things that need to be thought

about here. But certainly as it comes to financial services, you know, if you're engaged in this financial product space, you you have kind of the existing regulators that that are coming to bear and I think you know they're all working through how they can coordinate better, and that's something I would encourage because you know, you are going to have different regulators, there's no doubt about it, whoever roll. But it's how they coordinate together and then send that

clear message to the industry about what the rules are. Okay, Cathy. One thing I've been thinking about an addition to algorithmic stable coins a lot is utility here when it comes

to crypto. And I guess and not ask this question all the time because I think with the carnage that we've seen over the last few months, two trillion dollars in wealth just completely wiped out in billionaires lost money, but some people, you know, normal people lost everything, And I wonder about utility here beyond aculations sell us on the utility of this technology. So this is something that is definitely something that's been asked about over and over again.

I mean that the blockchain technology really is, you know, secured by the token and and mining and you know, all of that mechanics, and that's where the digital market, the digital asset markets um are are base. And so you know, people are saying, what what is this in the future, I'd say it's again all of the use cases that we were just talking about our frankly, they don't they don't come without the token UH and the

digital asset markets. And so that's the part that will be interesting to see so many parallels to you know, the nineties and and even with even you mentioned Kara with the two thousand dot com burst bubble burst then. But I would say it's really incumbent on the industry to move together smartly and and start demonstrating all of the things that will be built of this and the fact that we're operating, you know, with integrity, that we're

providing disclosures and clarity and transparency UM. And you know that's where companies like Solidus Labs come into is we're really pressing market integrity right right and certainly UH in terms of surveillance and monitoring. Kathy Croningar, she's former director of the Consumer Protection Financial Bureau and vice president of Regulatory Fairs at solid Us Labs joining us on the phone from Washington, d C. As for bitcoin right now, thou dollars a hundred and thirty one dollar. If it's

moving around fast. You're listening to Bloomberg Business Week with Carol Messer and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. We just have about ten and a half minutes left in today's Friday trading session, so we're getting ready to wrap up the day and the week. We're just coming off our loads of this session. I'm looking at the last five days. I mean, we've had quite a rally

underway this week. Yeah, we have look at that even the month, Carol, we're up five pent this month on the s even with being down more than one percent. To be afraid to open up before oh one case soon maybe maybe, I mean we're still sub forty four thousand. Let's get into it with Michael Sheldon. He's executive director in chiefment chief investment officer at High Tower r d M Financial Group, joining us on the phone from Westport, Connecticut. Michael,

good to have you back with us. How are you good? Thanks very much for having me. Okay, so tough year two so far, but we've still got a few months left. We've wrapped up the first half of the year. Here we are in month seven at this point. Give us an idea of where you're seeing opportunities right now, because a lot of people we talked to say, hey, the choppiness, this is going to continue. Yeah, well this week was looking back this week, there were some encouraging signs I think,

although it's still a little early to signally all clear. Uh. Some things we were watching this week was high beta stocks outperformed low volatility stocks um below investment grade bonds, so the credit side of things perked up a little bit. We saw some better performance in semiconductor stocks and consumer discretionary stocks, so those are all positive signs. And for the first time since the market high in January, we saw more than of stocks on the ny SCUM have

a positive day. So that was on Tuesday, so those those are definitely something. Carol was off that day. Is there any correlation there, I'll leave that to the It is true when I'm away usually when the markets sell off, So I don't know what happened on that day. No, but our creedy GROUPDA talked about it earlier in the week. Right. When we see market moves, a thin market, our little

participation either direction tells us one thing. But when we see a broadening of breath to the upside or downside, that tells us something significantly. And we saw broadening a breath to the upside this week, and that's a positive. Yeah, you're absolutely right, but I think you also have to look at the weight of the evidence. So we're still dealing with a lot of macro economic uncertainty. The yield curve is inverted right now, so that's a spread between

two year and ten year notes. Unfortunately, Uh, that inversion is historically led to weaker economic data. The dollar continued to be fairly strong, and that's a headwind for US companies. A lot of companies are mentioning the dollar, and the reports and weekly jobless claims have started to trend higher after reaching I think it was the lowest level in fifty five years last year. So we still face some macro economic headwinds. Um. I think as we go through

earning season, uh, so far things look okay. Starting the second quarter earning season, earnings estimates were for about a four percent increase and now we're at about four eight percent, so that's pretty good. And more importantly, looking ahead to two thousand twenty three, coming into this quarter, the earnings estimates for next year, we're about roughly nine point four percent.

Today we're at eight point seven percent. So we are starting to see some of the earnings estimates come down, but not as much as you would expect considering the uncertainty we're facing. And so, Michael, what are the reasons where why it's still too earlate to signal the all clear? Is it because of things that you just mentioned, including those weekly jobless numbers coming out for the you know,

three weeks in a row. Yeah, I mean, the U. S. Consumer represents about two thirds of the overall economy, so it's really important to sort of have your pulse on what's going on for the consumer. So so far this year, the U. S. Economy has generated about four undred and seventy five thousand jobs per month, and that's a pretty

good number. However, weekly jobs claims, as I mentioned earlier, starting to drift higher, and that indicates, you know, you've heard comments from a number of technology companies that they're starting to either reduce their hirings or lay some workers off. And another thing we watch, which is more leading, is the Leading Economic Indicator, which came out this week, and that's declined in five of the six five of the

past six months. And the reason that's important it tends to sort of forecast the direction and the economy looking ahead over the next few quarters. So right now, the FED is laser focused on reducing inflation, and as long as it does that, we're likely to study see somewhat weaker economic growth before things ultimately turn around when inflation peaks and and starts to come down when inflation peaks. Carroll, Yeah, that's the question. Well, and the thing is, you know,

help me out here. Historically, I kind of I think I've been reading some things that I've talked about that once inflation does start to come down, it kind of comes down rather quickly. Are you anticipating that that's what we see, because I think there is also some concerns that, you know, the FET is going to end up being too aggressive and maybe overdoing it. But but it's but it's not you know, an exact game or exact science here.

Right when it comes to rate moves and the impact on inflation, how quickly it comes down, Well, that's that's the challenging thing for investors and for the markets. Right now, we are starting to see some signs that inflation is peaking. I mean, right now, inflation the CPI number is at about nine point one, which is the highest level since one so we're at forty year high. So a lot of investors in the market today haven't seen this kind of inflation. But I think we're starting to see some

signs that inflation maybe peeking. For example, the job market is starting to soften a little bit. Commodity prices are starting to come down, whether you look at things like copper, lumber, steel, and the housing market is also showing signs is flowing. Rate rates overseas for shipping goods are starting to soften. So you put this all together, and it seems likely that we should start to see softer economic, softer inflation data as we head through the fall. Well what about

peak inflation here? We just heard from Steve Matthews in our Atlanta bureau, and he's got this survey of Bloomberg economists who are essentially saying that, okay, expect to seventy basis point rate next week, but then we're gonna start to see the Fed put the brakes on a little bit. Do you start to do you think we're going to see a cut in twenty three? You know, it's interesting you hear more and more economists actually calling for a

peak in rates at the end of December. So that means, as you said, so we're likely to when the FED meets next week, we're likely to see another seventy five basis points an increase, so that would leave short term rates at about two and a half percent. And then we have three more meetings, so we could have a half point increase in September, I mean three, and then

maybe two more quarter point rate hikes. Uh, and in the last two months of the year, which would leave rates at about three and a half percent at that point. I mean, that's that's an eternity from now uh looking at the markets, but at that point we could very well be in for a pause. It sort of depends a lot on the incoming economic data, and the FED

is continued to say the monitoring the data. Yeah, I feel like this is going to be an important meeting in terms of if we do see j Powell starting to talk down that maybe you know, they could they could be a little bit less aggressive, but we will we will know in about five days time from now. Hey, Michael Sheldon, thank you, Executive director, chief investment Officer at High Tower r DM Financial Group, joining us once again on the phone from Westport, Connecticut. Thanks for listening to

Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube. Search to Bloomberg Global News