Secondhand Watch Market Growth

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. Well, let's talk more restaurants. We heard from shake Shack after hours. Uh, and let's talk a little bit about Red Lobster. Kelly Valid is CEO of Red Bobster. She joins us on the phone from Orlando, Florida. Kelly, great to have you. How are you. I'm well, thank you, it's great to be here. Good. Well, we've been you know, Red Lobster privately held company, so

we have insight into how competitors have been doing. Um, and you know, we're hearing a lot about cost pressures. We're hearing a lot about inflation, rising food prices, rising wages. Is uh, what is the state of Red Lobster right now? Yeah, exactly,

it's a It's an interesting time for sure. So all that is is true and we've said this all along here at Red Lobster that Covid has been an equal opportunity disruptor in the way of Yeah, the rising wages, Um, you know that's here to stay, right, that won't undo itself. And yet we are seeing some stabilization of the of the workforce, being able to retain the folks that we have, and then we're just continuing to hire and look for great people. On the supply chain side. We've got a

fantastic team. We've stayed in product and we've been able to pivot and and still offer great value. We've just launched value forward offers on our menu that dropped on January first. So, um, we're we're finding that balance and that's the key right now. So let's there's a lot there, So let's unpack some of it. First of all, when it comes to managing labor costs and also having access to the workers you need, walk us through both of those.

Are you paying more for workers? What is that doing to your you know, bottom line, And are you even being able to find the workers that you need because you can do just so much online, you still need people. Yeah, absolutely, Yes, a lot of our our business has pivoted off premise and catering and delivery, but yes, we still have lots of people in the restaurants and the demand has has rebounded certainly, which means we've got to have great people to take care of them. So then we have no doubt.

We we're paying more everyone is, and we're paying more, and we're keeping up with that same pace you have to. And then we are doing everything possible and using every channel you can imagine to recruit new talent. And at the same time, we're focused on taking care of the employees we have so that they choose to stay with us for the long haul. So, Kelly, does that mean you aren't getting all the workers that you would like to be hiring. Well, we're hiring an incredible clip forty

thousand plus, uh is what. Well, we'll hire more than that this year, so we are getting we are finding those workers. Sure, it's a challenge, but again the strategies are I think outside the box, do whatever we can to to just get more people in the door and keep the staffing levels up. Level forgiving sounds like a lot. It is a lot, but it's not a lot if

you really need eighty thou workers. To give me some perspective here, Yeah, I mean we we need, we will need and higher about a total of about fifty thousand this year. And you know, um that's about what we need. And we're close to forty thou you know. So we are in a good place and not yet where we'd like to be, but in a in a good place in terms of our hiring right now. Uh. Wages, Uh, can you give us any numbers average wages? How much

you've had to increase them as as the pressures have increased. Yes, we've increased our wages. Uh, probably about eleven a little over eleven percent at this point. So what's an average? What's stay away from? Yeah, I'll probably stay away from what our average hourly rates is. That's a pretty it's so competitive about there right now. We are competitive and we are where the industry is paying in full service

restaurants right now. You mentioned a lot Pivoto online, so many of the restaurant space quickly figured it out right. It sounds like you guys did too. How much of your business is online versus in store? Yeah, our business, we tripled our off premise, and off premise would be delivery,

catering and explaine takeout. We've tripled that, so we are over of our business today is takeout and delivery, and that is about where the industry sits as well, and we expect that to be a permanent there's a permanent trend change or permanent behavior changes and shifts. So our primary businesses obviously still dine in, but you see people pivot to off premise and to go when they want to feel safe when things change, uh, and they need

to us to meet him where they are. And the exciting thing is we're getting that's an incremental guests in a lot of cases that is now choosing to come to Red Lobster. Kelly, Does that mean there's a physical redesign or rethink of the actual layout of the restaurant? And that's a great question, and that that's all a lot of what we're looking at right now. So it

certainly can. But there's also things like virtual brands that were exploring, you know, just how do you find a way to get your food into more people's hand, So it could be a physical redesign. We've optimized the space that we have. We've got the factis actually we have big restaurants. We have a lot of space to work with. So there's been a lot of redesign that's already happened

in modifications and will continue to look at that as well. Well, what's the modification We just got about seconds and we'll come back and chat some more, but what is a modification that you guys are thinking about? Yeah, you could, you know, so we have to go doors and windows today, but optimizing that space, um, you know, there are some looking at drive thrus. That's a possibility that we'll look at.

But we've optimized the space and we've got separate rooms where we can facilitate greater you know, throughput of our to go windows and are to go doors to get the food out quicker to the parking lots. Kelly, help us understand the ownership structure here because you've been on a CEO for less than a year right now, and as Carol mentioned before we went to break it was owned by Darden for years, then two off to a private equity company for a few years and now it's

owned by this investor group. How does that work and how do you work that into your and what's that like for you in terms of how you report a CEO? Yeah, sure, it's it's basically a board structure. You know, they own a fake and and there I have a board assembled of mostly those folks in Thailand. How Union is the company and the investor group, and then I've got a great, really well rounded board, uh, comprised of other folks that

are industry experts. So it's a great it's a it's a pretty normal structure and great relationship and great partnership. We'll talk a little bit about supply chain here, because how Union is a huge seafood supplier and I'm wondering how that works into your supply chain. Yeah, sure, they absolutely are supplier of shrimp for us and and a

few other things. But they Yeah, we keep We've got some some great firewalls in place, and uh, they're they're able to help us, you know, wherever possible and provide great solutions as we you know, are in a challenge environment. Shure, We'll forgive me, But why do you need firewalls in place. I mean it sounds like, well, if they own you, you you can they can provide you with seafood. Oh absolutely, just to make sure it's competitive, just to make sure

we're doing all the right things. Absolutely they can. Sure. Yeah. Well and it's interesting too. I mean I do wonder about being do you prefer being privately held in a market environment that can be very tough on companies. We talk about this a lot. We see entrepreneurs in startups. We talked about earlier this week about the billions you know,

uh plus unicorns that are out there. But companies are able to grow and stay private for a lot longer because there's a lot of money out there that enables them to do it. Tell us about the benefits of being private, Well, sure, there are those benefits. There absolutely are, and I've lived in both worlds. In the public facing environment can be challenging and it teaches you, uh well, there's a great discipline in that. There's a lot that comes with being publicly held and being out there in

front of of everyone to see your results. So it does help. It helps where when there is a need. This is a brand will continue to have a revitalization strategy in place, and when there's a need for investments, there's patience for that and uh, in that case, yeah, there's an understanding of what's what's really needed to doing the right thing for the business that can help sometimes

for that reason. Kelly, how have you navigated changing COVID mandates, MASK mandates, different restrictions throughout the different states, counties, towns where you have read lobster locations. Yeah, it's been interesting and you've had to just really make it part of every you know, every single day understanding what's happening. We've got a task force, we've got a crisis team that's

in place. We've got QA folks kind of you know again that they wake up every day thinking about making sure that um, we are up to date on everything that has to happen. And so we stayed a prize of it, and we listen to listen to our guests. We've listened in social sentiment, we understand what's important to them as well. And then we've just tried to be really clear about our safety protocols and steadfast in what

we're doing. Uh, stay stay along, you know, go along with everything that we need to and UM keep guests and employee safe. We've been able to do that. So in place, were there ever situations where you had vaccine mandates in place and restaurants because a city or a town or a state required them of employees. Yeah, absolutely, UH in New York, UM, where the guests that required the guests to have it. We have absolutely had to

deal with some things there. In Canada, where have we have restaurants that are company owning Canada, we've also had restrictions California sets and unique restrictions UM, primarily based on the guests and then requirements for employees. Are there different dining patterns in those areas due to restrictions? Yeah, i'd say you you would feel it. Sure. Yeah, we definitely had felt it in UH in New York And in response to that, you would have Yeah, there was. I

think that's obvious. We've seen by now how divisive some of this could be. Unfortunately, so you would definitely hear at times from guests and and we could we could feel the difference with those mandates in place. Not tricky. Hey, listen, you have been in this industry a long time. UM. We love talking with folks who are dealing with you know, consumers um just got about thirty thirty five seconds left here.

Based on what you're seeing, the outlook, the visibility, how do you think the consumer is doing and what does it tell you about where we are in terms of

economic growth? Yeah, I think the consumer is still they're very sensitive to all the price that's been that that's happening, all the things that are happening around inflation that I think they feel that they know that, you know, we're doing everything we can to price under where inflation is and still have great value forward offers h in place of red lobster. People count on us for that, so

we're working really hard on that. I think the consumer, you know, there's obvious, uh, the tax returns and the idea of maybe those being smaller this year. I think, well, we could certainly have an impact. The consumer headset, I think is still a little bit uncertain, and yet they still want to be out in restaurants enjoying a great meal around the table with friends and family. So I'm optimistic and that Guarden Alright, We're gonna leave on that note.

Thank you so much, really appreciated all your time, Kelly valat Vlad. Excuse me, Kelly Valade, uh CEO Red Lobster joining us on the phone in Orlando, Florida. Great snapshot of the restaurant industry, which we know has had such a tough time during the pandemic. And just to hear her insight, Yeah, Kelly, you gotta come back soon. That was just fantastic. So we've been watching a lot of

the markets. Just want to point out that we are going to new lows here on those major equity average in fact right now down about two point seven percent on the Nazis Charlie mentioned, two percent down on the S and P and the Dow down about one point eight percent. So as Charlie mentioned, that selling intensifying, and we've also seen some pressure when it comes to the oil market as well. Yeah, that's right. We're actually seeing West Texas Intermediate down two dollars right now, Yeah, down

about two point two. Yeah. Interestingly enough, Hey, we got a really special guest with us today, Mike mclogan's senior Commodity Strategies at Bloomberg Intelligence. It is I say special because he's with us in the Bloomberg Interactive Broker studio from Miami where he is now based. These days, Mike, I want to start with oil and then of course

talk crypto with you as well. Um help us understand the oil move that we're seeing today, because if tensions do and as they have been rising on the border of Russia and Ukraine, shouldn't we see that reflected in higher oil prices. Yes, I think oil is doing a two thousand and eight. It went up on the escalator and down on the elevator, so we have to worry

about that. So right now it's got a very significant reason to be high potential war with a lot one of the largest crudeil exporters in the world against one of the largest grain exporters in the world. But you can only go so far. You get leverage positions and you pull back. I think we're just seeing some of that today. But if this armed conflict happens, crudel can easily jump well of a hundred dollars. But I think that will be the beginning of its end and its demise,

because they will kick into a recession. It's like a repeat of two thousand and eight. That's my prediction. But right now what we're seeing is just a little pull black in that bull trend and The key thing is we're seeing the great reversion in total as surprises like Carol mentioned, you know stock markets down, what don't we down in the year almost almost twelve percent in the NASTAC To me, that's what's happening. So at the beginning of the year, where facing okay, FED going to tighten.

Now we're facing the FED and the war um. So to me, that's what's part of it. Just crude oil is year is making everything worse, it's just pulling back a little bit. Well that's what I mean. How do we incorporate crude as an indicator of inflation, Well, it's it's look at two thousand and eight crude oil peak that onl in July, and that was right before everything collapsed. So it is one of the prime indicators. But the juxtaposition of which happened versus then and now is unique.

Back then, the US had a property crisis, and we're the largest net importer. Who's doing that? Now China is having a property crisis and there's the world's largest net import and what's net exporters? So US is very well poised for this potential conflict. That's the binary nut model right now, If there's a conflict, then Crudel will continue advance in the shorter term, but it will lead to a move back towards fifty. Why fifty that's the cost

of production to the US or below that. If if, if there's a cleat complete pullback, stocks will do well. Crewe Kroto goes back right back to seventy. And that's what the forward curve of pricing for. So it's violatively but it's just so much going on there. And look, we probably see a lot of pressure ease at the pump for American consumers, which is something that there are a place through they're feeling a lot of pressure. Like I want to go back to what you said about

a possible recession here. Um yeah, well what makes you say that all the signs of starting to starting to show up in the curve. This was one of the things. Obviously, I was one of those people who did well in two thousand and eight. I was just too early. Um ti timing. Yeah, it is time you get stopped out Like the big short he was just able to hold on. And there's no better way. I mean, let's put it

this way. If we have armed conflict in Europe and commands continues like there's a very good chance we're gonna have a global recession. We're way overdue because we had that massive stimulus. They had a sugar high, and it's all going away, right. Every central bank in the planet is looking to titan except maybe in China for reasons they have to. So that's what I think we're looking forward to here, and the stock market might be the best thing to price it in. If the stock market way,

we're doing correction. We did it in two thousand nineteen and those who worked up fine was that eighteen I think was the end of eighteen um. But it's way overdue for that, and I think that's what's happening. It's just a question. The unique thing is also bitcoin has been a leading indicator. It's been weird. Hell that's been working like today it was are you saying we should

be following what bitcoin is doing? Absolutely like today. It showed weakness from the very I shot last night, and it's predicting what you said right at the top of the show that the stock markets down a lot. It's been doing that consistently, and we have those days when the stock markets down a lot and bitcoin starts move bumping up the stock market foul. So it's unique. So far this year, bitcoin has been a very good leading indicator. But it's it's it's just a question of how long

that lasts. That's what's so strange, because you know, months ago we talked about and you would come in here and we talked about it being digital gold right like. And on Bloomberg TV when we were joining our friends at Bloomberg TV, Caroline Hide had her chart that showed the divergence of gold and bitcoin right now, and they're moving in completely opposite directions and Bitcoin not not acting like hey then can't make it easy. So the way I like to describe goal is you can't hold the

old analog anymore without having some bitcoin into space. Because it's a fact that their gold is being replaced in portfolios with bitcoin. It's a question of the duration of that. So I fully expect Bitcoin to come out ahead. And what I see is a very bullish gold. One problem with bitcoin and all cryptos if they advanced so much so far, they're still very speculative and they have the most room to go back. But I think they will

come out ahead. It's just gonna take time and a lot of opinion between It's particularly if the stock market continues to drop. You know what happens when stock mark drops a lot, more correlations go to one. I don't know if you say this story about Heavier Blast and Marcus Ashroth by central banks got inflation so wrong, and it just talks about monetary policymakers um misjudging commodity markets. What do policymakers have to be careful about as they

look at commodity market moves? So I'm a big fan of Javier um and I did you agree with this a little bit? I think the key thing is they didn't get it wrong. They were too late because it was the most of an inflation we're having now is not from commodities commandies are. Finally, let's look at Crudel. If the Crudel catches up to its peak price in UM two thousand and eight in terms of pp I would be two a barrel. Yeah, so that's a barren

market and it's going to continue that beer market. That most inflation is from um UM employment cost index is from that's owner's equivalent rent and and wages, So crude. That's why I look at Crudel's a great leading indicator though, because it's it's potential for a reversion is what I think will lead this total reversion and everything. But right now it's at that stage where there's a war potential war,

and it's just bidding for that potential. Like you know, exactly why the bid is because of the geopolitical is completely geolomical, because this is just going to make more supply commine. We love when you're in town. We love when you're in Florida, but it's even nicer when you're in town. Mike mcleogan, Senior Commodity Strategies of Bloomberg Intelligence, here with us. Well. According to Mckinzion Coast sales of pre on watches which reached nineteen billion and nineteen our

forecast to grow to more than thirty billion. Remember that's something our Bloomberg Pursuits team highlighted in last week's issue of Bloomberg Business Week. The team took the time time to really dig into how to buy a vintage watch online. Not only did they take the time to do that, Carol, they really dug into the pre owned sector of watches. We have the perfect guest to join us right now. Are Vander wall Is, CEO of watch Finder and Company, joining us on the phone from London. Are you and

how are you? I'm doing very well. It's thank you for having me well, thank you so much for joining us on this. It seems like pre owned watches everywhere I turn. You know, a new friend is starting this watch collection and I'm wondering the activity that you're seeing right now and why you think that. Look. I think it's fair to say watches have always had a moment, but it really feels particularly right now, like the stats

that Carol shared, they're having a moment. Yeah, it's there's an an incredible I would say the watch Finder we've been around this year will actually be our twentieth anniversary year.

And there's been I would say tremendous growth throughout, but especially in the last two years, and there's a there's a further acceleration, and I think it's just at the overall level of awareness has has grown significantly, so that previously many customers they simply didn't know that you could buy pre owned watches, or that you could sell them

and part exchange them. And now it's becoming a more and more appealing option and um I think also the concept of sustainability and circular circular economy plays into that um and beyond that, with the growth in demand, there's also just a mismatch in supply and demand. If you look at new and that's exactly where we where we

come in. It's, yeah, that's tremendous growth. We'll tell us about what you're seeing in terms of the amount of buying activity, changing, repeat customers coming back making a purchase and then maybe a year later doing something else. Selling, buying, How does it all work? Yeah, So for us, there's really three different paths that we define. So one is everything that we sell we buy ourselves, and pretty much all of what we what we buy we built side

directly from customers. So that's a big part of our business. And what we do for all the watches that we buy, we authenticate them and we service them and we bring them in the best possible state before we sell them. And that's the second party is selling, and then the last party is party exchanging. So it's really uh, upgrading your pre owned watch and buying a new pre owned

watch through us. And I would say the customer base is gradually changing that we see more and more younger age groups getting in and what you also see and pre owned is very easy to access it through digital, much easier than it is with with buying new and then the existing audience that we've had historically, you also see a stronger and stronger interests and also because it's shifting more and more being seen really as an asset and as an as an investment. Essentially are and you can.

You can buy watches through watch Finder, you can sell your watch through watch Finder, you can exchange for another watch through watch Finder. Can you help me out with some of the numbers here because I know you do. Uh. Can you refurbish in a sense? Right, somebody exchanges a watch, but is there what's the premium that then you turn around and sell it for when you're when you're able to sell it, and what's the idea of like a

time for turnaround? Well, it really depends. So if you look at our current capability, then we can roughly buy or we can buy essentially what is in the market. But we can serves around three thou watches a month, and that's at the current magnitude that we have across all of the markets that we operate. And something that we're scaling significantly over time, and in terms of our ability to make a return on it, it really depends

on the brands. If you look at ro Legs and Potectually, there's an incredible demand, so we're not the only ones in the market are interested in buying a piece and therefore the margin opportunity for us is smaller. But it also depends greatly on at the level of work that needs to be done to the watch. So the watch Finder has at the largest independent service center in Europe where we service and repair all of the watches in house and all of these factoring so it's a it's

a very wide range in that sense. So if somebody if somebody Exchanges are watching your New York show room, for example, you're sending it to Europe to be serviced. Um, it depends so currently some of the work so we are starting to localize more and more of our activity.

So historically everything would be shipped to the UK, but especially in the U S which is a very important market for us and a real focus market, is where we're developing more and more local servicing capabilities so that we can do everything and the watch doesn't have to leave the US, so really fun to look on your website. Uh, and you know you've got watches that are thirteen twenty thousand, a hundred thousand, two hundred thousand. So tell me how

the process works. Because the pandemic, like really, even on the high end, people would have like a virtual show room or meeting with between a customer and a salesperson. Like it it happened. So how what what do you do? I want to buy a two dollar watch from you guys that's online. Do I ultimately go to a showroom? Yeah? I would say at that price point, the majority of our customers would want to have the watch in hand and make the transaction after having personally inspected to watch.

Although what we have seen, especially during the pandemic when all of the show rooms and all of our critiques were closed, we even transacted very high end watches completely digitally,

which was very surprising to us as well. UM. But our average sales prices is not at the two on a thousand US level, so it's much closer to ten thou us UM and at the lower price point, we see a lot of transactions taking place online and what we have additionally as an in house sales team where people send an inquiry to us and then we follow up and then most of it has actually done quite old school by phone um and the transaction taking place digitally.

But even when people prefer then obviously we have the ability to meet in one of our showrooms. But I would say the biggest difference between pre owned and new is that traditionally and pre owned we were already much more set up to cater to digital distribution. It already represented maybe and during the pandemic, you see and knew that there has been a tremendous growth in in kind

of the service offering. But I would say it's um, it's something where we had a good head start and we really benefited from it over the last year and a half a y and I know, you know, we just have thirty seconds left. Uh, it's hard to name your favorite children, but what's your favorite wise, that's a great question. And we are part of the Richmond Group, so I might defend some of us in the group, and it's a it's a long end zone, which is part of the group. We had him on the company

we had him on recently. Incredible. Yeah, it's a it's an incredible very aspirational and and the history and how they do it is just remarkable. Come back, please, we'd love to talk more. Arian vanderwald Val is a CEO of watch Finder and Company on the phone in the UK. So we've gone from daily COVID updates being atop the most red on the Blueberg to Ukraine updates being at the top, and today that included a story about President Biden saying that there's a very high risk of a

Russian invasion of Ukraine within the next several days. There's a lot going on. And earlier Anne Marie Hordon Bloomberg TV Washington Correspondence, she caught up the Ukraine Ambassador to the United States, Oxana Makarova, and she talked about Ukraine specific goals here. We will never give up on our sovereignty, we will never give up on our territorial integrity. We

will we give up on our EU Atlantic aspirations. But how to dren peace and how to stop the ceasefire we are ready to discuss because for us again, we are prepared to defend our country. But unlike Mr putin the value each of our soldiers and each of our civilians. So we would like to averd the war. That was Ukrainian Ambassador to the United States Oxana Marcarava telling talking to Bloomberg News is Anne Marie Hordern. Let's get into it with the Bill Ferries, national Security team leader for

Bloomberg News. He joins us on the phone from Washington, d C. Bill, bring us up to speed on on the latest right now, and because we're certainly seeing a play out in financial markets. We heard from Secretary of State Anthony Blincoln earlier in the day, as we did

from President Joe Biden as well. Um, what's the latest. Well, the U S seems to be taking I think a much more pessimistic tone to what was probably already a pessimistic tone on the situation, saying that with President Biden saying that there there may be some sort of false flag event already starting on Pool along the Ukraine border or in that eastern region, the don Bass region that has been a contested for years between UH separatists and

the Ukrainian government. And then you had you had a big U N Security Council meeting that followed up with that with Secretary Blincoln kind of diverting his travel plans he was due to head straight to Munich this morning, and he flew to New York and gave a presentation there uh and made a made a little bit of a peace offering, saying that he had reached out to Russia's foreign minister to propose some sort of a meeting

next week. B Lincoln will be in Europe starting starting this evening, I guess, and and there at least through Sunday. We don't have a response from the Russian side on that. The Russians, of course continue to say that they're undertaking military exercises, that they have no plans to invade. But the U s tone this morning, starting with Secretary b Lincoln and President Biden, was much more downbeat from what we heard earlier in the week when there was talk

about Russian troops possibly pulling back. You know what I find baffling, Bill, is that at a time where there's incredible surveillance that we can all do of one another on so many different levels, right through the cyber world through physical I'm trying to understand, does the US really have a clear handle or do NATO allies have a clear handle on what is really going on on the ground, so that they have a true understanding of what the intent is on on the part of Russia. Well, the

intent is the big question. I don't think we have a sense of the intent. Um, they certainly have very good insight into the numbers of troops, the kind of material, whether it's tanks, mortars, missiles, those kind of things that are getting moved around, and that's where they've really pushed back on the Russian narrative that that they're starting to

draw down as these exercises wind down. Last night we had a briefing from US officials saying that in fact, they think up to seven thousand more troops have arrived uh In in the borders, so they see the opposite they're they're saying, basically the opposite of what Russia is saying.

A lot of that is trackable from the intelligence agencies, But I think at the end, ultimately you're asking a question about, you know, what's inside Vladimir Putin's head, and I don't know that even his top aids would be able to explain that. Well, maybe what less about what's in his head, but more about what intelligence analysts think is the long term goal of Russia here. What do you what do they tell you when what are your

sources telling you? Well, we hear you know, there's a variety of things, and some of it has Russia has already achieved in terms of of of Putin and Russia as a nation being taken far more seriously than they were to say, several years ago. Um. You know, Ukraine has been a thorn in the side of Russia ever since the collapse of the Soviet Union, and for Vladimir Putin in particular. Uh, if you wanted to get more mercenary about it, you could say, listen, this build up.

We did some reporting last week. This build up has helped bring billions of dollars or into the Russian treasury through the through the spike and oil prices. I think our estimate was something like up to sixty five billion dollars more for Russia. So that will really help help

keep these troops deployed. If that's if that's part of what Putin's goal has been, all right, forgive me, I'm not so good with my European history always, So why is it that the Ukraine has been or Ukraine has been a thorn in the side of Russia since the

breakup of the Soviet Union. Well, there's a lot of you know, it was a part of it was considered a part of Russia by many Russians for for a long time, and it was you know, even I think, uh, frankly, there are Russians who don't agree with Putin's policies, who never took the idea that Ukraine was a was a separate,

independent nation very seriously. But more recently Russia has definitely seen Ukraine's aspirations towards getting into NATO, towards being more closely alive with the West, as a real threat to its national security. Would have thought that this is kind of the discussions we'd be having here, Hey, Bill, just in the last thirty seconds that we have with you, talk to us about sanctions and the power of the

United States and the European community actually have in thirty seconds. Well, there's you know, there are some nuclear options that the West has if the US and its allies can agree. You talk about and we don't mean literally nuclear, although we do have that, but no, no, but no like nuclear financial like kicking kicking the kicking Russia out of the swift financial messaging system that would be that would be devastating for their banking system. For where's Putin's money

just quickly. We don't know. I know that's there's a lot of a lot of energy has gone into trying to figure that one out. All right, good stuff, Bill, thank you so much. I know it's busy on your end, so thanks for a funny time for us. Bloomberg News National Security Team lead leader Bill Ferries on the phone in Washington, This is Bloomberg. Yeah, but you let me drive? Oh no, no, no, no, oh please, I'll let I want to drive. It's a good question. This is the

Drive to the Clothes down on Bluebird Radio. All right, just about ten minutes left in today's trading session. Our team, of course and led by Charlie Pellett, updating you on the markets. We're hovering near are loads of the session. So definitely a risk off trade for this Thursday. Let's get to it. Let's get to the drive to the close. Janna Barton is equity portfolio manager who now focuses on tax managed equity and core equity strategies at Eaton Vans.

You wanna joined this on the phone from Boston, Yanna, how are you? I'm doing great, My timing could be better. I think to join you guys only on red Day. But well, there have been a lot of them recently. In fact, I was just looking at one of the functions terminal and you know, I see the SMP five hundred down, you know, right now, significantly, But it's it's only it's worst day since February three, so it's it's

been a day a year of declines thus far. What do you make of it, Yanna, I, I think again, there are lots of questions. It's very fewful proof answers, a lot of uncertainty, which obviously investors don't like. But you name it, uh, and the visibility is market, whether it's policy, geopolitics, growth, inflation, um. But if you mentioned, I think the draw down that we're seeing in the market, the SEP is down about ten percent sort of from

peak to trough level. It feels very uncomfortable, but it's actually quite normal. The the SUP five pounder usually declines around fourteen percent on an annual basis. And I think for investors to us, the asset class of choice remains equities because the cash flow yield is an excessive four percent earning field is an excessive five percent and dividing yield is an excessive one and a half percent. And

this is relative obviously to the fixed income instrument. And that's what it's all about, and that's what it's about, right, we kid about Tina, there is no alternative, but I mean when it comes to equities versus fixed income, just a very simple um comparison in the markets. I mean, this is why equities, many would argue, is still attractive exactly.

I think what it's also on discourse is just the importance of being diversified in the equity market, right, and we talk about sort of the the the ABC is being active, being balanced, and very company specifics. So being selective I think matters in any market, but particularly now where you're seeing more peing that is really taking hold with then growthier areas of the market. So does that mean there's no place in a portfolio right now for

fixed income? Oh you're talking to an equity manager, I know, but you know you but you still have to but you know, you still have to figure out asset allocation. And you know, I know a lot of your clients have to figure out asset allocation, or you have to figure out asset allocation for them, and there are a lot of questions about, you know, because they must ask you. Hey, Yanna, I know you're the equity person, but I gotta think

about fixed income definitely. I think the way I would look about finding value right um, Ultimately, it's exactly what you said, Carol, which is where is the value in

the market today. I think for investors that are attracted to fixed income instruments, perhaps in the area like utilities, which we refer to as defensive, growth can offer a mix of capital appreciation with that stability as um, you know, given yield is an excessive two and a half and three percent, and they're really at the cust book sort

of enabling that green tech revolution and energy efficiency. So I think there's a lot to be had there for growth investors, value investors, or investors that are seeking stability. Well there it is, okay, well, so, okay, it is tricky at this point. I mean, how many how many of your clients, Yanna, do you say, listen, this is volatility. I'm looking at the VIX right now and you know, another spike and no kidding, we know it's a volatile environment.

How many of them do you say, kind of stay put, let's see where this settles, or how many do you say, here's here's the transparency, or here's the visibility that we have that we know the next six months are going to be X, and so here's how you should do it. Well. We're very fortunate our best clients, we always say, at the most educated, and what we're trying to do and what we're trying to construct the portfolio of diversified equity exposure that is really focused on achieving long term after

tax returns. That means that we have exposure um to all sectors in the market and over sixty industries, and it's that's skew when we're using this volatility to kind of lean into laggards and teach some money off the table in areas of the market that have done well. And that's exactly what we're doing right now, which is why I'm mentioning utilities. Healthcare is an interesting area, Materials is an interesting area, all of all of which have

been laggers to date. So to us, it's kind of balanced constantly balt onnesting and unfortunately, unfortunately we've been pretty active and harvesting losses as well. Because to us it's all about capital preservation. Where are we when it comes to the cycle that we're seeing, at least in terms of this down market. Look another day of declines for the SP five hundred for the Nasdaq, for the TAO.

But at the same time, we're at levels that we last saw less than a month ago, back in January, when we saw sort of the bottom for at least this this most recent cycle. What what's the bottom here? What a great question, Tim, and I wish I knew the answer, But I do know that there are two sort of key events that we're waiting for as investors

to give us some mark priority. Obviously, during the March sixteen sevent meeting of the FED, we will know how fast the tightening policy is going to take shape and what it will look like. There will be a lot of visibility to the biggest fear that the market has right now. And obviously the conflict that we're all watching between Rush and Ukraine as well. So, um, you know, to me, the sentiment is wobbly at best, and it's

really feels oversold. But as I'm watching many of the stocks that you guys mentioned, just when you think you can't go lower, it does, so that is why you know, I think it's it's very difficult to call the market, which is why you've got a dollar cost average, know what you own and have a list ready to go when the opportunity presents itself. Yeah, I mean exactly. And this is where you need to know your fundamental stories,

which is many would say and understand it. Where don't you want to be though, um that you feel with certain confidence at least on the equity side of things. Oh um, My colleagues are probably not like this answer. But anything that sort of um is driven by things we can't control as fundamental investors. I mean to me, um, an area like energy, I understand why it has done so well, But I look at the scorecard of all the sectors. You've got one sector that up over and

everything else in the green. With geo politics and crude oil prices and currency what it's doing, I just think that, uh we in a couple of months we might be on the other side of that trade. It's not to say that energy doesn't have a place from the portfolio. I'm just saying, tactically speaking, you know, you should always lean in areas of the market that others are shying away from, and that seems to be an opportunity there. All right, we're gonna run, Janna. Thank you so much.

Janna Barton, she's equity portfolio manager over at Eaton Vance, joining us on the phone. 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