This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus gloom O Business Finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Listening in on surveillance this morning, I have to say Bloomberg News International Economics and Policy course by Mike McKee. He noted how this morning CPI report probably the most watched and most benign report because there are a couple more before the Fed meets next on September twentieth. But nonetheless, and he said, focus on the month to month, not the.
Year every year that that was important.
Did you do that?
I did? I did? I did? I did?
All right, So let's get more on today's data set because we've got a great duo, I should say, with us, because we should put out that headline number right posting its smallest back to back increases in two years.
That was important, Tim, that was really important. Let's get into it with this roundtable that we have. We got Nicky Baird, vice president of Strategy to aptus on Zoom from Littleton Call Dorado and with us here in the studio is Bloomberg News Economics editor Molly Smith. She's with us in the Bloomberg Interactive Broker studio. Malli, I want to start with.
You because he was the one swing.
This was like your this is like your super Bowl every month, This is like your US Open every month.
Oh well, let's not go that far too, So got the rest of.
August, so give us, give us the give us. We've talked a lot about the highlights and the takeaways. Any surprises to you in.
Here, not really, I mean, and I know that's that's bad for ratings.
We shouldn't say that that this was not.
Surprising, honest as expected. I've been told that's not good to say on the air, but it was true. And you know, I always look for an opportunity to knock Mike McKee, but he was right. You know, focus on the month a month, don't pay attention to that little pickup in the year over year. And yeah, I mean it did. It was pretty much as expected. I think for me, I was surprised to see that Shelter was ninety percent of the increase. I mean, I know it's
been a lot. That's not normal, right, I mean, it's been running it definitely. Maybe we've seen it run for like two thirds of the increase, but now seeing it at ninety I mean, if anything, to me, that's just sounds like the disinflation in other categories is really happening and just in shelter taking a bit more time.
Yeah, more targeted.
Let's bring in our other guest with us, as we said, Nikki Bard, vice president of strategy at Aptos on Zoom from Colorado. So, Nikki, from your perspective and what you look at and what this all means for the consumer, what's kind of front and center for you.
Yeah, I think what Molly said is right in line. It's like, this isn't something that on its own is going to have an impact on consumer spending or consumer behavior. We're already in the back to school season, we're looking ahead, of course to the holiday season ever important for retail, and this one indicator isn't enough to say that there's anything drastic that's going to happen to consumer spending between now and the end of the year.
Hmm, Okay, why is that?
Well, just I mean, like the price increases that have been happening, they do especially in the things that impact their discretionary spending. Those are leveling off, which is great news for everybody. I think what's more important to watch is we have the consumer the student loan debt repayment starting up that could potentially show up in things like Halloween spending for example. That might be an important leading
indicator going into the holiday season. If consumer is a very discretionary kind of spend and it's exactly the kind of spend that is made by the people who are going to be most impacted by that kind of debt repayment. Those are the kinds of things that we're looking at to understand how much there is the impact of on consumer spending going into that all important holiday season.
I have to say, just one anecdotal individual. Things are still expensive and I feel it when I go to the grocery store. I look at I feel like everything in my world just doesn't matter. It's expensive. Supercore price is molly. I want to come back to that because
I saw on the blog this morning. I think it might have been Iri Jersey or somebody else pointing out which is supercore prices closely watched by the FED when it comes to inflation rose in the twelve months through July, and the first acceleration this year its services service prices is minus and energy and housing right, which follows a June reading that increased at the slowest pace in eighteen months. So it sounds a little erratic down and then up.
So do you disregard it or how do you see that?
I mean, I think that's kind of the overall story of the inflation as a whole, right, you know that, like we've all known that, like the path down to two percent is going to be long and it's going to be bumpy, So I would put this in that same camp. And like the increase in June that was the smallest in eighteen months, Is that what you said?
Yeah?
Yeah, so that was four percent. This month was four point one. So kind of like okay, like not.
Really explaining hairs.
Yeah, you know, it's kind of like the same with the headline, you know, being up, you know, three to two this month. That was up three percent last month, and a lot of that due to the base effects conversation.
But there is something to the effect that as we get closer to that two percent, right, it's tougher in terms of bringing the inflation down.
Yeah, and it's going to be in those exactly those supercore core services X housing categories that are the most concerning. Those are the ones that are the stickiest price pressures. And you know, a lot of the disinflation we've had so far has been kind of the unwinding of, like the of the pandemic inflation pressures that we had. It's been some like easing of like the pressures from the war in Ukraine.
So it's it's.
Still debatable of how much the Fed's work has really brought about disinflation.
That's that's a really good point. And I want to ask Nikki what her thoughts are on our concerns are when it comes to energy prices on the rise again.
Yeah, I mean again, from a consumer spending perspective, anything that eats up that discretionary budget is going to be the things that really drive whether or not consumer spend. I think you know, what we've seen uptil now is that consumers have been willing to accumulate debt in order
to keep and maintain their spending levels. And I think it's a great point, like they're spending just as much, but net wise they're actually buying less because their purchase power just doesn't go as far with all these sustained high prices. But I think that you know, that idea of being able to continue to finance some of this consumer spending with some of the debt that consumers have been using before, that's starting to come to an end. Energy prices and again you know, the interest rate on
that credit card debt. All of that stuff is going to come into play much more in terms of where consumers can go and how they can continue to impact and support the economy.
Following up on that, Nikki, we actually had the CEO Advantage Score in here today. They're a provider of credit scores to millions of Americans, and he was making a lot of similar points that you were just saying. And something that he's actually said on Bloomberg TV before is that the resumption of student loan payments get this is going to have a bigger impact on Americans than a rate increase.
Well like, so one twenty five basis point increase has less of an effect.
And the resumption of payments.
I mean that makes sense because you think about the what the average student loan payment at pocket right, It's exactly so if you're not spending that money. You know, if you're spend, if you don't have that money anymore because it's going to student loan payments, then it's not going to goods and services.
Yeah yeah, I mean, Nikki, what do you think about that? You think he's like on it with the terms of the comparison there.
Yeah, I totally agree. I mean I think that the basis points rates, those increases take a little bit of time before they actually filter down to the consumer. Right, It's not like today it was this and the Fed raises it and then the very next day that's impacting the rate that consumers are paying. It takes a little while for that to flow through. But that loan repayment, that's like immediate budget hit. It doesn't matter what the
interest rate is. It's a repayment on something that you were able to take off the table in terms of budget before that now you have to put right back in. So if you combine adding that in and then you look at those other factors that can potentially impact consumer spending, like energy prices, like housing prices, the shelter inflation still is making up most of that increase. Those are things that are going to strength the budget that consumers have for anything else.
Nickey, you work with the retail industry all different types. A lot of it is about technology innovation. That's you know, your background and you've covered this for a long time. I am curious that what you're hearing from your retail clients right now. When it comes to the environment hiring, consumer trends.
Yeah, labor crofts are still really high, and there's been no give back in that regard for frontline workers in any place. So whether the labor market is soft or whether it's you know, continuing to chug along, you know the effective hourly rate that a lot of retailers are paying to staff. I mean I see advertisements and windows in the Denver area for fifteen, seventeen, twenty dollars an
hour for a part time frontline retail jobs. So that part of it is definitely still impacting their business very much. So I would say the other factor that historically was impacting inflation, seems to be easing up, which is on the supply chain side. So we're definitely seeing where supply
chains have evened out. There might be some weird things like shiracha that come along and disrupt very specific things but overall and in general, I would say that the supply chain issues and the shortages that really impact the price rises of twenty twenty one and twenty twenty two, those definitely seem to be smoothed out.
Just got about forty five seconds quickly, Nikki. Are we going to see more of what we see in Zara where you dump stuff into a bin and it comes up on a monitor and we don't need workers And I'm taking off the security tag.
Uniclide does it too?
Yeah, Uniclode has definitely been a forerunner there. You know, it's both of those companies kind of went on their own to kind of drive that innovation, and the rest of the technology industry hasn't completely caught up with that. So I do think that we can get to that point, but I think there's going to be a delay. They like custom built their own solutions to do that.
And I'm going to be back in the stock room real quick. Mollie Smith. Just got about fifteen twenty seconds. What's your next focal point?
Oh goodness, I think we've got PPI tomorrow right hopefully?
Is really a focal point?
I mean, look, it's another inflation point, you know, it's another thing before September and then I guess Jackson Hole.
But the US opened obviously we more important.
Wait a minute, Okay, good.
Kat talking to Mollie Smith and not talking about it.
And I can tell you already there's going to be crowds. And if you want to look for a sign of consumer spending at the higher end, tickets are.
Already have sold out for some days.
What do we think the Honeydews is going for?
Molly Smith, Nicky Bard, thank you so much.
Over ad aptos. This is Bloomberg.
You're listening to the Bloomberg Business Week podcast. Catch us live weekday afternoons from three to six Eastern Listen on Bloomberg dot com, the iHeartRadio app, and the Bloomberg Business app, or watch us live on YouTube.
We're going to talk a little bit more about Tapestry. As Charlie mentioned, you know who they are. They own coach Kate Spade, you know, used to be coached but rebranded a few years ago.
I was going to say, I don't know if everyone knows who they are. I think like when this rebranding happened, Carol, I was like, I'm gonna have such a hard time Keeping, Capri and Tapestry straight and like what companies they own.
I was gonna like, I feel like I'm gonna age myself, although I was not.
I was young, or it was my older.
Sister's album, but Carol King and Tapestry, like, every time I see it, I'm like Tapestry.
That's all I can think of.
Of that album anyway. Yes, Capri Holdings, though it was created by Michael Cores, it owns Versace, it owns Jimmy Cho, so it definitely is kind of your higher end eight and a half billion dollar deal, as Charlie laid out, and so we are seeing some movement when it comes
to luxury goods. I feel like that has certainly been a bright spot when it comes to retail, although, forgive me, coaching, Kate's bait not inexpensive, but I don't know if I put that in the same category as something like an lvmah.
Well, I'm glad he brought them up because that is the context here, right, taken on the European rivals, and we got a great group to really talk us through it. Bloomberg News US Luxury Retail Personal care Industries reporter Janete Newman joins us on the phone from New York City, and our Bloomberg Intelligence team Deborah Aitkins, senior analyst who covers global luxury goods, home beauty, and personal care. She
joins us on the phone from London. Hey, Janette, I just want to start with you give us the context here, some of the deal terms, but also the context that you and the team wrote about on the Consumer Team earlier today.
Yeah, thank you so much. And I also love the Tapestry album as well. I will just I will, I will, I will join you on that. I mean, I think, I think some of the context here is just that, you know, Coach went into the pandemic much stronger than Michael Core's and has come out of the pandemic much stronger than Michael Core's. And we're seeing that, you know, in the sense that now coaches parent company is taking
is taking over at Michael Core's. And I think some of the reasons for that, I mean, you know, keep in mind, going back at decade, these companies used to be kind of head to head competitors, and Coach has really pulled ahead of Michael Cores. It's been able to raise prices, raised its brand, brand Cachet. It's done that through you know, some clever some clever designs. It's renovated its stores, whereas Michael Core's has struggled a bit more. It's still very present in some kind of lower end
department stores. As you both mentioned, I mean Michael Core's is more a mass market coach, is not. You know, it's a level of competing with some of the LVMH's of the world. But it's definitely been able to charge more more for its handbags. And both of these companies, you know, together now, I mean they will have completely they will completely dominate the US handbag market all right here in the US.
Well, Deborah, we want to bring you into this, as we've mentioned, senior analyst who covers global luxury goods, home, beauty, and personal care for our Bloomberg Intelligence team. She's on the phone in London, Debra, how do you see this deal? And is it about the Michael Core's brand, Is it about Jimmy too? Is it about fisaces?
All of it? Like, how are you thinking about this?
So they all have their place are but when we think about microcres seventy of the business, you know, the purchase price there it's about really reinventing the micro courts that manage to do so. I see that in the US will be the big market in the fixed market, in digital, in wholesale, but but also you know, there's there's much more to do elsewhere, and I just feel
that Michael Cares has lost its way. It really reinvented itself a few years ago, and then I felt it became too saturated in the marketplace and there's more to do. And I feel that the data composition and the way that digital works and the way that if we think about the way that Tapestry works, that they depend less on wholesale accounts, which is really felt the pain in the US in the last few months, then that could
be beneficial. The other side of it for me that there's a lot to do with Sosauce and Jimmy Cho. They're not sizable. There was always a comment that the SARChI could double and that it should be doing more in Europe too, and it gives it gives a footprint for Tapestry into that luxury market which is so much more profitable and much faster growth.
Jenett, I want to bring you in back. I'll bring you back in I'm looking at Tapestry down about sixteen percent it's been it's that it's pretty much its lows of the day, and Capri no surprise as being the target here is just not quite a premium right, at quite a premium right in terms of this deal. I
mean it's up fifty five percent. I'm looking at it's an eight and a half billion dollar deal and we're looking at a market cap of six point three billion, So, you know, it's just kind of interesting in terms of some of the financials Tapestry shares. Not surprising for it to be down as the acquirer, but it seems like a lot is that investors saying you paid too much.
I think part of it is an investors questioning how easy it will be for Tapestry to turn around the Michael Core's brand, which has some of the you know, the problems that that Debra, that Debra laid out right, I mean, Tapestry is essentially coach coaches the majority of its revenue, and Michael and Capri is essentially Michael Core's that's that's the bulk of it of its revenue, something
around like seventy percent. And as Debra said, it's been a brand that's been struggling, and so to make this deal really work, Tapestry has to turn around Michael Core's. And you know, people would say, okay, well, the executives at Tapestry, they've been able to turn around the Coach brand. You know, think about the Coach brand a decade ago and think of where it is now. It's really elevated it. But the question is still there, you know, whether they'll
be able to turn around the Michael Core's brand. And keep in mind, you know, they turned around Coach. They did a okay job turning around Cape Spain, although that's still a work in progress. They did not turn around Stuart Wisman. Their other brands. That's kind of that's kind of in the dumps, and now they're taking on three more.
So the question is still there if they'll be able to kind of take this successful Coach playbook and apply it to Michael Core's while they obviously are juggling a lot of other a lot of other new companies that they've acquired to at any.
Regulatory risk here, I think that's that's.
A question that's been it's been raised, and we'll, you know, obviously we'll have to We'll have to see I mean this some of the data that we that we have from Global Data and Analystic Global Data. Uh, you know, these two companies combined will be the fourth largest luxury company in the world, with a market share of around five point one percent. In the Americas, they'll be the
second largest player behind LVMH. So that those those numbers make people think that's not as much of the concern, but that is still to be sure.
Debra as an analyst who's covering this sector, and I do wonder how much time do you think, you know, investors need to give Tapestry to be able to kind of figure out how they turn around the core's brand.
Knowing maybe some of the problems.
I have to say, I feel like I see cores everywhere and I feel like it's a little saturated.
Maybe that's part of the problem.
Yeah, yeah, I would say this is a two to three year fixed. I mean, it doesn't it's not let a complete until calendar twenty four, So we probably see by maybe end of first quarter twenty four that this deal completes through and from there we wait two years for two hundred million synergies to move through. We end up. I think with a maybe an an adjusted EBITDA margin on the back of that that's probably one hundred and fifty basis points and get it to mid teen's operating margin.
But versus some of those peers, as appears, that still isn't enough. So for me, I think it's a two to three year process, and I feel that standalone could pre given where the debt was and how it needed to turn everything, that it maybe is better within this portfolio because of that wholesale adaptation of the model, because of the data capture, because of working more closely with digital. There's a big difference between these. But the other side of it is I actually feel that it's in the
price that this was going to happen. And when we say, you know stocks are very much today, trailed back over a year and was looking at a mix of buy and hold, arm or are on a function looking at potential price target, it's about above an AD when we're looking at recommendation. But that price target was seventy dollars, and I know that was now over sixty percent of the market was into the Northern Road put, which is cooled down, but it's not fair gitten into the biggest ye.
Of our Bloomberg Intelligence team and Jeanette Newman of course at Bloomberg News who both of them. Of course, following this space.
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, tim you got to.
Say What's straight to the CDC website for the stats on this and found each year, approximately thirty thousand cases of lime disease are reported to the CDC by state health departments and the District of clumber How Columbia. Excuse me, However, this number doesn't reflect every case, and I guess they say it could be if you use different estimates and method dology.
I'll get it out.
It could be as much as almost half a million people may get lime disease every year in the US.
Because the other issue we're going to talk about this for the next you know, ten minutes. Yeah, the other issue is that these cases don't necessarily all present symptoms in the same way exactly. There's no clear definition coming from medical professionals.
All right, so let's get to it.
Nicoled bomb Garth is with us, professor of Molecular Microbiology and Immunology at the Johns Hopkins Bloomberg School of Public Health, which, as you know, supported by Michael R. Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropy. Is Nicole joining us on ZOOM in Baltimore. Nicole, nice to have you here with us. Lime disease summer. I think about it. I'm up in you know, if you're up in Connecticut or out in the woods, like you know, you know that this is
something you need to think about it. Tell us, though, from your perspective, how bad really? I can talk about cases, but how.
Bad is it?
And as Tim said, it's not necessarily the same thing for everyone? And what does bad mean in terms of the impact it has on individuals.
Yes, thank you for having me and for this topic. I think you're raising a very important point. We're just that in most cases individuals who get bitten by a tick and develop lime disease, we'll go to the GP and get the necessary antibiotics and we'll recover fully by the small subset of patients not and that could be because maybe their diagnosis was delayed, that may not have known that they had a tick bite all because of some genetic predisposition that we don't really fully understand. And
the developed disease that can be very debilitating. It can lead to long term consequences. So people talk about having brain fall, not being able to concentrate, developing a neurological symptoms, and unable to function, and that really is life changing for these individuals.
Professor. I've talked to people who have hadline disease and they tell me the resistance that they came up against in their diagnosis from the medical community about being diagnosed. And I'm wondering if you can speak to that at all, if that's changed in recent years as we become more aware of it and more aware of the symptoms.
Yeah, I think it has has changed. I mean I think where the resistant was was never to you know, you appear at your GP's office and say you've seen a tick or you've been out in the woods, and now you display these symptoms. You may even have that that very distinct woods I rush A gpiece would immediately come to the conclusion that are more likelihood you have
line disease. It's really those protracted cases where you have these very non specific symptoms of feeling tired and having this brain fog and having pains and aches that are really hard to pinpoints, so very non specific, and then not having this history of having been out in the woods, not making not being able to make this connection where people really are resistant and you know, if the diagnosis is protracted, you may have been out in the woods,
but you don't recall it. It's now weeks and months ago, and many of us go go hiking frequently. So that is really where the non specific nature of the symptoms and we don't really have a really good diagnostic and some of the patients that are being diagnosed don't come up.
With a positive dict like there's no test or the test just yeah, I mean, forgive me, but I don't know much about this. There's no test, or the test doesn't show you know, the test isn't conclusive.
So when there is a test, and it's actually two tests and you have to be positive in both tests in order to be qualified by Celici criteria of having lime disease, the problem comes when only one of the tests shows are positive or the test doesn't show exactly you know, isn't positive for all the criteria. So it's not a very simple yes no test like we're used to it, like what's the COVID test. It's a little more complicated. And so so that is when the problem
comes in. And that again goes back to patients maybe having had the infection but a long time ago, and so it's not so clear to diagnose some using this test. So the test, a positive test is always clear, but when the tests are negative, you don't know whether really means you haven't hadlines.
Hey, one thing, I'm curious whether it's limes disease or something else, Nicole, Are you thinking more and more about just the world's getting really populated and we are increasingly pushing animals out of their normal domains and just living closer and closer to them.
Is this just kind of part of.
The problems, whether it's limes disease or other illnesses, if you.
Will, it clearly has to do It has to do with you know, climate change ticks on the move. You know they're moving because it's warmer now and areas that can move into areas that the previously didn't in the
hospital for them. And it is what you said, the sort of us getting out there in areas that we previously didn't worn out, and so we are really getting into the life cycle that has been evolutionally established over a very long period of time, and we are sort of interrupting done as much as they're interrupting us.
When I was preparing for this, there's actually a map on the CDC website that shows lime disease cases over time by different states, and you can start it twenty years ago, back in two thousand and one and see the way that it's migrated. It's pretty remarkable, and not in a good way. So, Professor, I'm wondering about vaccine here because my understanding is that Viser's working on something and it's been delayed, but it's in stage three trials
right now. What can you tell us about a vaccine for lime disease.
I think it's absolutely doable, as I heard the band before I came on. Yes, we're giving it to our paths, right. Dogs get the lime vaccine, horses can get a lime vaccine, and so I think it's absolutely doable to develop one I'm very excited about the clinical trial. It has been delayed and there have been some problems, so I hope it we'll go forward and give us good results. The challenge with any vacciners that because you know, we're getting now into the quoder months, so the number of lime
disease cases is going down. This is obviously a challenge for vaccine to show efficacy, but just really can we reduce the number of cases of lime disease in the population that got vaccinated. So it's a matter of how many people do we vaccinate right, and then how many of them would normally get lime disease. So it's not a straightforward clinical trial, but I'm very hopeful that it will show hopefully efficacy.
Because I have a really silly question because I do think about my dogs, you know, flee in tich and there's medicine we give that used to be some chemicals on the back and now it's a pill that's got like all these different things. I mean, if we could do it with pets, why is it kind have taken so long for us to maybe do something for humans. And if it's not safe for my pet, maybe I don't want to be given to my pet.
Yeah, I mean we don't want to go into order. But I mean there was a vaccine on the market, of course twenty over twenty years ago that was taken off the market, but it wasn't taking off the market because of law efficacy. There wasn't an idea that it may cause side effects that we didn't want.
So those with those understanding is those were unfounded, and it came at a time where there was a lot of skepticism about vaccines.
Absolutely correct, Yes it turned out to be unfounded. But I think once you have that doubt that something, maybe you don't want to give something that's supposed to prevent a disease on cause of disease, right, So to err on the side of caution, I think, and really yeah, to not have the headaches of people going off you're for trying to give a vaccine. I think people the company pointed off the market, which I think overall is unfortunate. Right,
you're seeing rights and cases. We need to really develop a vaccine.
We have thirty seconds left. Just give us three tips on how to stay safe from ticks for the remainder of the summer.
Yes, we're long sleeved pants and shirts, and you know, be a be a goof and put your socks, trousers into your socks, and check yourself after you arrive home for ticks and and your loved ones as well, and maybe have a shower because some tics you can before they're fully attached, you might be able to shower them away.
We felt like we feel like little monkeys at home because we're always checking each other.
You got to do that, And god.
I've spent hours pulling ticks from my dog and the call bombguard. She is molecular micropology and immunology professor at John's Hopkins Bloomberg School of Public Health.
Thank you so much for joining us.
This is Bloomberg Business Wait inside from the reporters and editors who bring you America's most trusted business magazine, plus global business, finance and tech news. The Bloomberg Business Week Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio.
Hailey Berg is back with us lead economists at the travel app Hopper, and she joins us on ZAM from Boston. First of all, Haley, we got that CPI print. We did see airline prices coming down. Talk to us about the environment, right now. What's going on in terms of pricing.
When we look at the domestic market, A lot of what we're seeing this year is being driven by increased capacity from airlines. We typically see a pretty tight relationship between fares and how many seats are available to book. Right now, we're above twenty nineteen levels. There are more seats available to book on domestic airlines and there were
at this time in twenty nineteen. That combined with better jet fuel prices down significantly from last year, still a ways to go compared to twenty nineighteen, and demanded opening up to international destinations, all has combined and has really
added to a seasonal effect. Typically fares drop at this time of the year, but that's being compounded by this increase in supply shift and demand and some relief fun costs, and that's how we end up with prices about ten percent lower than last year and versus twenty nineteen.
So did the international tickets are they just like totally exempt from this we're seeing because since demand is so high, international is continuing to be expensive.
International remains extremely expensive on long haul routes. Think fares to Asia well over fourteen hundred dollars up almost sixty percent in economy. That would be an average what we call a good deal price. So at economy basic economy ticket pretty much anything excluding first or business.
All right, so Asian? What about Europe? Specifically?
Europe was very expensive this summer peaks over fourteen hundred dollars a ticket, but we have seen significant improvement in the last couple of weeks. Some of that is seasonal, some of that is supply. Airlines have gotten back to about ninety seven percent of twenty nineteen capacity, so we have seen demand shift back international. If it feels like everyone you know is in Italy, it's because they probably are.
I feel like the.
Third person, like the third person to say that to me in twenty four hours.
You're so everybody's going like if you.
Open up Instagram, apparently, yeah, where's the place to go? Sicily? Is it like because of the white Lotus?
We are definitely seeing some what we call set jetting, So Palermo and Tara Mina in Sicily are very popular. But then some of the usual suspects we see, the Amalfi Coast Rome and Milan like Como very popular at this time of year.
So what happens. Does it stay this way or then once we start to get closer to holidays it starts we start uptick.
On the domestic front, we have a couple more weeks of these low fares. We're expecting them to bottom out this month, and then they'll start rising in late September early October when travelers are starting to plan those trips for Thanksgiving and Christmas, and we'll see them rise back
to reach about pre pandemic levels. In December, we'll pretty much match where we were in twenty nineteen and twenty twenty two in December about toot eighty a ticket if you're booking something at the end of the year.
Okay, so when should we be booking for holidays?
Not yet, it's too really, I think it's truly getting everyone is feeling trigger happy. But the sweet spot for booking your trips home for the holidays is actually from about September fourteenth to October fourteenth. So that four week window at the end of September and early October, fares for trips home for the holidays they start incredibly high.
In the summer.
You'd be paying about twenty percent more than previous years. If you booked right now, But if you wait, they're going to come down during that sweet spot. That's really when you want a book.
So you're saying, if I've got a kid to bring back home overseas because of college overseas, I got to book that ticket pretty soon.
Yes, international affairs for the holidays. You'll want a book between now and probably the end of September. So you've got a couple of weeks, maybe two months.
You've got to tell her now or else you won't do it.
Non stop ticket on a popular route and you see a good deal, definitely go on.
You know what's funny though the kids, The kids haven't even left yet for their trip.
That's what I'm saying, she's here right now. Yeah. What about what about hotels and I don't know, cruises. What are some of the other things that you're seeing When it comes to travel and costs.
Hotels are still pretty expensive. Prices are about ten to eleven percent higher in this time last year, about one to eighty a night for a US hotel.
But something to keep in mind.
Is travel behavior. We are definitely travelers now who are planning a little bit more less minute. When it comes to flights, that's actually a good thing for hotel booking. Booking hotels at the last minute, as long as it's not a major resort that sells out early, can actually save you about twenty five percent off of peak prices.
Because most people plan ahead.
If you're booking the last couple of days before check in, hotels drop prices, you can actually save a significant amount if you're a procrastinator.
I want to go back to the fuel costs and to what extent fuel costs have to do with high ticket prices. Do you know, Hayley, what portion of an airline ticket is accounted for in fuel costs? Or I should say, what portion of a ticket you know is made up of fuel costs.
It varies by airline, depending on you know their operational expenses in general, but also whether they're hedged. But traditionally we've seen somewhere between fifteen and thirty percent of operational expenses coming from fuel. It also differs by domestic and international.
Those long haul routes are less efficient with fuel. But typically, you know, if we see a ten percent increase in jet fuel prices, for example, we might expect about three percent of that to be passed on to three percentage of that ten percentage passed on to consumers.
Hayley just got thirty seconds. Any signs of recession in the data and what you are seeing in the trends that you are seeing.
We have been looking for it for maybe eighteen months now, and I can say we still have not seen weakness in demand in spending, in what we hear from our users on the Hopper app on the whole, we're hearing we're spending. We're spending more than we have historically, We're taking more trips, and we're also seeing that in the data what our bookers are actually doing so seem to see strength and travel continuing.
I'm just going to say we have to go, but I'm just going to get on a little rant here. The airports are too crowded, they're gross. Being on an airplane is no fun unless you're at the first on the plane. It's miserable, and yet we pay through the nose for it.
You are a crank man.
It is like when traveling with kids.
The thing it's like, it is hard, it's very difficult.
You expect me to change a diaper here, and then when you get me a dirty.
The little one crising.
There's like, hey, I don't care any there, They're fine. Haley Burg, lead economist of Red Hopper, Thank you so much.
This is Bloomberg Umbro mac.
A Journal.
How about you let me drive?
Oh no, no, no, no please, holright please, I'll do gravel wat I want to try it. It's a good question.
This is the Drive to the Clothes Timing well yold it on on Bloomberg Radio.
Right, TikTok, everybody. Just about seventeen and a half minutes left to aim today's trading session. Carol Master along with Tim' stenemiclive in our Bloomberg Interactive book or studio on YouTube and Bloomberg Originals. And I think Romayne said it really well in terms of the bouncing around that we are seeing, certainly in the equity trade. I feel like that's been going on throughout the week, Tim, But you got yields there.
Good.
I it's kind of wild today, Carol. You you look at the Nasdaq, for example, and it was up as much as seven tenths of a percent yeah earlier today? Yeah down now down?
Yeah?
Down right?
Yeah?
Yeah?
Kind of flat.
I you know, I think we're going to live from data point to data point, and we're also going to wait until kind of the next FED meeting. I feel like that's going to be our life for a little bit. But let's see what Aaron Kennon says. He's much smarter than me, that's for sure, and is in it. He is, of course, co founder and CEO Clear Harbor Asset Management. They've got about a billion in assets under management. Joining us once again on Zoom from Stanford, Connecticut. Hey, Aaron,
good to have you back with us. It is an interesting market, but let's have some Tim Oways reminds me got to take a longer view step at a little bit in the perspective. We've had quite a run, certainly when it comes to some of those big tech names and the Nasdaq overall and.
Also the S and P.
So a little bit of churn maybe is to be expected.
Absolutely, Yeah, thanks for having me back, Tim Carroll. We've gone a long way a year to date, and what a change from twenty twenty two, for sure. But you know, if you look at just this earning season that we're still sort of wading through, but we're more on the
tail end of it, you know. I think the reality is that we've many companies, or the most of the companies have beaten expectations, but when you look at year over year earnings growth, not much has changed, and so those expectations have have been exceeded, which is something that we all all welcome. But markets haven't reacted, you know,
dramatically as a whole to the earning cycle. And I think, you know, the market's trying to figure out whether or not a pe multiple for the S and P five hundred at twenty times anticipated twenty twenty three full year earnings is the right multiple given the current environment.
Do you think it's the right multiple?
Well, you know, it's interesting. I think the bond market is signaling two different responses to that, and I always sort of, you know, peer into the bond market to try to help me answer that question.
Tim.
The inversion of the yield curve suggests that a recession is in fact around the corner, whether it's the back half of this year or perhaps the front half of next year. But nominal rates are actually higher on a year to date basis, which is sort of a little bit of a conundrum for those who are trying to extract tea leaves from what the bond market is telling us right now, we think, you know, when you look
at the trajectory of inflation. We saw CPI this morning, and you know, a year and one month ago we're at nine percent headline and now we're at three point two percent. So we've come a long way. And the FED if you look at FED fund's futures, looks like it's it's on hold. I think there's only like a ten percent chance of a move in September, and so you know, it's just sort of interesting thing, particularly with the significant i think the most significant short interest in
the treasury market that we've seen in my lifetime. Where we are right now, where the bond markets sort of signaling that maybe we're not all clear on inflation, maybe growth remains stronger than expected, and the equity market is a little more a sanguine on that point.
So PE multiple how reliable? How much do you use it as kind of an indicator, a reliable indicator of where we go from here?
It's not a first of all, you have to look at which components of the equity market we're looking at when we talk about PE multiples, because it's where we come from in Pes where we may be going what's the historical basis for pees if you think we're going into a deep recession, pe multiples for the S and P five hundred ten to bottom at fourteen times fifteen times, So you know, that's an anchoring point if you believe in our landing markets, certainly not pricing that in. You
also have to think about P multiples within sectors. You know, you look at Europe, you look at you know, heavily industrial banking focused part of the equity market. Well, naturally P multiples because it's a lower growth segment of the market and the economy are going to be lower. So it's not healthy for one to sort of look through the S and P at twenty times in compared to the European market that has far less technology and therefore growth exposure.
Okay, so I ask you this question all the time. Eron, someone comes to you with money, how do you deploy it right now?
Well, you know, oftentimes people come to us with capital that's invested. You know, we're very cognizant of tax implications. I would just say this, based on where we think inflation is moving, we are incrementally more bullish on taking a bit more duration risk in fixed income here, in other words, extending out into fixed income, owning high grade fixed income that means to US treasuries, mortgage backed securities, and maybe even some investment great credit exposure. On the
equity side, we still believe in diversification. We think there are opportunities across multiple sectors. We're just not given the current valuation in the market, we're not poised to sort of increase our targets here. But we do believe in equities for the long haul, and that's a philosophy that we've always embraced here at Clear Harbor.
Hey, on the treasuries are the fixed income side, what kind of duration you said you're willing to go out a little bit?
How far out?
Yeah, Well, if you look at the Bloomberg Gaggregate bond Index, which is the primary benchmark of the fixed income market, it has an average weighted maturity of about eight and a half years, maybe a little more than that. And of course, you know, it seems like mister market in fixed income is hugging the front end of the market right now because treasury bills are well over five percent and the yield to maturity of the Bloomberg gaggrigate is
only about four point nine percent. But if you think the FED is sort of done or about done, we think this is a good time to at least nudge your average maturity and duration further out the curve. So it depends on the client, depends on you know, what the objectives are, but just moving it out. If your average maturity is now one year's you know, maybe you can move it out to two or three. If you can move it out to eight and a half and you're at two now, maybe you move it out to
four or five, you know. So you know, it's making those sort of incremental shifts right now, given the sort of risk reward that we see in the market.
Right which maybe explained to where I think was it the thirty year today? The treasure auction didn't go as well as I think some of the auctions earlier in the week. Maybe some of that longer duration erin. Thank you so much, We get a run if you well Erin Kennon, co founder CEO at Clear Harbor Asset Management over a billion in assets under management, joining us on zoom from Stanford, Connecticut. What's do you look like you're thinking about something?
Yeah?
Yeah, I was looking at the wrong column. The Nasdaq was hired by one point six percent earlier today. I remember was starty this morning, you know, recording our weekend show. Yeah, I said, look at the look at the market.
We popped.
We popped in an hour.
The easy inflation prend I think made everybody find.
Out then what happens higher for longer? Oh that's new news.
I told you.
Did you get the memo?
The memo?
All right, guys, stick around.
More to come certainly here on Bloomberg Business Week, Carol Masser along with Tin Stanovik and this this Bloomberg Radio.
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