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All right, we'll get an M and a trade here today, which I think it's near and dear to a lot of folks that are particularly through seven eleven fans. I'm a wah wah guy myself.
Crystal cover that story as well this morning. I mean seven to eleven has the Icy, which I like versus the Slurpie.
What's the slur The Slurpy is? I think.
Grainier? You know, the Icy is a lot smoother. Yep, And I'm a bigger fan of the Icy. Had one last night that my drive home from Gray State of Ohio.
You were in Ohio? Yeah, what'd you drive?
I drove back in my Dodge Challenger RT scat pack wide body on I eighty. Yeah that's a good cruiser.
Yeah, exactly. Diana Rossettopania joints us here in our studios. She's a Bloomberg Intelligence consumer Staples Anos who is couch Tard and why are they buying seven eleven for thirty one billion dollars.
Well, Cushtard is the second largest convenience store in the United States. They manage circle K, yes, and.
That's why they have a French name that sounds funny to American years.
Yes, it took me actually a while to be able to pronounce their name. But yeah, so they're very inquisitive. We're not that surprised that they are, you know, their stocks, that they want to buy something. But sevent eleven is actually a big name. There's valuations going from like fifty billion dollars to as much as like eighty five billion dollars. So for them to be able to do that, it's it's quite impressive. If they are able to.
It's always surprising, I think to people who aren't in the know that seven to eleven is owned by a Japanese holding company, and I think they own Speedway as well. These seem like such American brands. So does Circle K and it's owned by a Canadian company. Is there going to be anti trust issues here?
Well, for sure, the FDC, I mean, ask Kroger. They have been trying to purchase Albertson's for a couple of years now. So if they actually come up with the numbers and there's acceptance, I'm sure the FDC will have something to say. Seven eleven has like about fourteen percent of market share in the United States, whereas Skushtar with their Circle K brand, they have about five percent. So it definitely will be you know, up for again.
I'm a wah wah guy, but you know I can.
See is wah wah just like a New Jersey.
No, no, but it is.
What is it's the It's in the Northeast. There's mostly in the Northeast. So but yeah, there's.
Explained to me this convenient store business. What's the economics of a convenience store?
I just see people going in and out all the time. What's the economics?
Well, basically, they want you to go in for your gas. They're very competitive in gas prices. Fuel margins have been improven in the past few years. Kush Star actually has about forty cents per gallon in terms of fuel margins. But what they're making money on is when you go into the store, particularly if you buy their sandwich sandwiches. The margins for that is like fifty percent.
It's true.
I was, by the way, I was filling up on the way there and back for more than four dollars and fifty cents a gallon.
O because you're putting in the super duper high.
I go with ninety three, and then I go in and I pick up a Snickers bar for my kid brother, and I got I don't know, like a TwixT. Each of those candy bars was more than two dollars and fifty cents.
That's margin there.
And I'm starting to feel like a really old man, you know, because when I was a kid, fifty cents is what you paid for these things.
So are these good businesses?
I mean, oh yeah, if they're buying, I'm sure you know. They they they think that there's some good business. I mean, Kushtart has Usually they they do big acquisitions. The last acquisition that they did was for eleven billion dollars for the total energy is in the in Europe, but they usually in the US they usually buy smaller operators. For example. Also this morning they announced that they bought get Go from Giant Eagle. So that's another convenience store which is in the you know, with.
The delicious cold pork sandwich by the way.
Oh well, I actually haven't tried it.
Yeah, I had one to go this weekend. H where's the get go? I had them in Pennsylvania.
Yeah, it's it's regional.
Yeah, okay, all.
Right, it's the Midwest. It's part of the world.
I don't go to.
I skipped the what's the one you like the cracker barrel?
Cracker barrel, I declined, But you probably drove through past like one hundred of them month.
Yes, yes, a lot of that. And I used to always stop because you get a books books on tape at one and then you'd return it at the next But you know, longer.
What else were seeing in your space than in a retail space? What are some of the key things people are looking atuse you cover a.
Lot of retail, Yeah, I mean, obviously, this is like the biggest thing that has happened today.
It's one of the biggest deals of the year, right well, yeah, even Dollars puts it like number two.
Yeah, I mean, obviously the Kruger Albertson's acquisition. It's also the talk of the town. There's like likelihood that it might not happen. The FDC might object So what.
Are we going to hear about that deal, because we've been talking about Kruger's and Albertson's for a long time.
Yeah, honestly, like it really depends on, you know, what happens with the election and how you know, M and A friendly the FDC will be afterwards, all.
Right, Well, seven to eleven by the numbers, and this is according to Bloomberger reporting eighty five thousand stores. That's huge, and they've got one hundred and fifty seven thousand employees.
That's a big business. Yeah, you know cushcharges.
I mean it's cure Start's got a bigger valuation fifty eight billion dollars valuation versus thirty eight for the seven and eleven, so much higher valuation using that stock in cash, I guess to get bigger.
Yeah, I think, you know, definitely, I mean, obviously I see this as an Asia play, to be honest with.
You, which we've seen more and more and more of, right, I mean, if you look at activists investors involved in Japanese stocks, for example, it goes from fifteen and twenty twenty two to twenty five last year to twenty eight so far this year, and we're only in the first half.
Yeah, I mean seven eleven has like thirty one percent of the Asia Pacific market share.
So yeah, now we're talking.
Now we're talking, Diana, Thank you so much for joining us. Diana, Orstopena, another one I hired back in today. She's blossomed into this great analyst. Very cool to see consumer staples analysts Bloomberg Intelligence joining us in the Bloomberg Interactive Broker studio, not mailing it in from like Nantucket or dear Value.
Work from home.
Yeah, so BI Management, we know what's going on.
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All right, our good friend Carl Icon in the news, but I don't think for reasons he wants to be. Crystal c joins us Bloomberg US Deals reporter Crystal. What's going on with our good friend Carl Icon? He had some some issues with the SEC.
I think, yeah, I think he's probably quite glad about today's news This is like coming to an end something that's hungover, like hangover his head on its friends for a while. Today's news is that Hits firm and him are settling a charge with the SEC and paying a fine of two million dollars combined. And that is an investigation on the back of the Hindenburg recent report from twenty twenty three saying that they've inflated some of their asset values and quote unquote operate like a ponse scheme.
So this is actually in some way good news, even though the stock doesn't quite reflect that today.
Yeah.
No, the stock took a hit I think was last year in May when we first learned about these investigations, and short sellers started questioning what carl Icon's loans were really based on. Does this wrap it up? Is this the end of it?
It looks like the end of it. So there are two investigations, if you remember this. One is the SEC
investigation at settlement. The other one they had previously disclosed that they were contacted by the US Attorney's Office, and today they put out a statement IEP and I competitive statement saying that they haven't received any substantive communication from the US Attorney's office since the initial approach, so they, I guess you can take it as a good sign no news and sometimes good news and off us reporter, but for like them.
You know that fifty dollars company, you know, fifty dollars plus and now it's a fifteen dollars company.
Yeah, all right, and shares it down today as well.
What's the all right?
I'm just looking at the stock here, as Matt saying, it's down seven percent today, down about eight percent year to date, and down thirty.
Percent over the trailing twelve months. So not a great move there, Crystal.
Thanks so much for joining us, Crystal, see just giving us the update there. Carl Icon settling it what is for him, I'm sure a very small number, couple of million dollars to settle some issues with.
The se c i EP. Carl Ion is eighty eight years old.
Icon, he's in good shape for eighty eight. That is still a very sharp guy. His company, I mean, this is a diversified holding company. They hold automotive investments, energy, gaming, railcar, food packaging, Marcus real estate, medals, home fashion.
Market cap seven point five billion dollars.
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Matthew Miller sitting in for Al Steel today in our Bloomberg Dinner Actor Brokers Studio. We're streaming live on YouTube as well as I hit over to YouTube dot com and search Bloomberg Podcast and that's where you will find us.
Green on the screen today. Boy, that two weeks.
Ago today when we had that big sell off and that man fixed jumping above sixty, you know, we got the vix back down below fifteen. It's just amazing the round trip we've had. So I don't know what to make of it, but I think our next guest might. Carl Schleife, chief investment officer at a Bimoh Family office, joined us via that Zoom thing. Carol, what's your opinion on what we've seen over the past couple of weeks again, starting with two weeks ago today when we had that panic sell off.
Yeah, it's not necessarily unusual for August to be exceedingly volved. All we've got a lot of senior people on the beach, and it can very frequently lead to some choppy trading, like we saw. It was a little eye popping back then, but having lived through the nineteen eighty seven issue, which was October, but still did a Friday to Monday, if that Monday had been similar, it would have been down nine thousand points on the Dow, not just a mere thousand.
That's great, but.
It's not unusual at all to see that kind of volatility. I actually would have expected it to have to follow through for a few days, and I wouldn't write off that we're done seeing volatility, especially if we get into Friday and people don't like what Paul says in the speech, and or we're just in between earnings and now we're off a good earning seats and we don't have much going until the Fed meets again after this week in September.
So well, we get to continuing claims out before that, and it seems like every little data point has become a big event for markets with I guess, you know, low volume, that's that's going to happen. But what could Powell say that would disappoint.
If he pushed off the likelihood of a September card, because I think most of the expectations are you'll see a cut in September. The question is just how much twenty five basis points, fifty basis points will he be able to structure commentary that actually, FED policy currently is very restrictive given where the economic data is coming in. And yes, the FED has made us all very data dependent and data watchers on every single point trying to
figure out which way the Fed's going to go. But there is a rationale and an ability for the FED to be able to say, hey, our policy is restrictive. We could actually chunk it down a time or two and it wouldn't be indicative of a softening economy. You've also got some retail numbers coming out this week which people will be watching closely at the biggest retailer report last week. And you've also got Nvidia coming out and if people don't like that, they haven't knocked it out.
Of the park.
Over and above where the expectations are, you could see that volatility in the markets in the short run.
All right, Carol, we've done this round trip over the past couple of weeks.
What do I do now in the equity markets.
Well, I think you stay invested. Hopefully you were invested through all of that and set tight. You know, we were advising clients.
You know.
The interesting thing is is if you had a diversified portfolio, even on that Friday and Monday that were very volatile, your bonds did well because the rates came down to the bond prices went up, so you had that durability built into the portfolio. You also look more broadly at things that should benefit if the FED does start to cut, right, small caps should benefit, mid cap should benefit. Lots of different industries here in the US should continue to benefit.
And we do suspect that once those rates come down, you'll see a consumers continue to spend because they're employed. You'll see businesses we suspect spend more than is expected right now. And maybe the biggest surprise out there is how low that tenure yield is, because we suspect it'll drift higher over the intermediate longer term.
All right, So once the FED, I mean, I guess we're all on the same page that they are going to cut and buyk So twenty five basis points do they continue to do that? Carol? Because we're growing still at two and a half plus percent, and unemployment, although it ticked up, is still only four point three percent, which is very low. Inflation is also well under three percent now, which is back to well less than even its historical average. So does the Fed really need to
be moving interest rates around? Why don't they just hold tight so that they have more powder left if something bad happens.
They still have an incredible amount of powder if you think through that. For ten to fifteen years, they had basically no powder because there was zero to zero point five percent. They're at five and a quarter five point three percent right now, so they've got substantial policy room and still leaving policy room even if they brought it down one hundred basis points over the next six months or so, You've still got got room in there to be able to cut if things really did tail off.
And the last thing they want to do is be caught behind the curve too, especially on that employment market, because you've seen the momentum tick up there, and granted it's from people coming into the market, but one question you have for yourself is are they coming into the market because of the they're being pinched by inflation? And really feel a need.
Carol, I know in your notes here you've got industrials and materials as a couple sectors you're looking at.
That's not very exciting. Why are you guys looking at that?
Well, the thing of it is you look at the charts on some of those industrials and materials, and they've looked the charts actually look a lot like in videos chart does in terms of there's a lot of fiscal stimulus or a lot of fiscal spending plans still in the works. Much of that money has been allocated but not necessarily spent, and a lot of that's not necessarily going to be pulled back. And the reindustrialization that bringing
manufacturing back to the United States. A lot of those plans are in process, they had to work through local permitting, and we don't think they're going to be turned back. You've also got infrastructure spent, so there's a lot of
reasons to think through that. But you've also got the notion where if you go back and look over the last twenty or thirty years, the industrial component of the S and P is shrunk, and given the attention and the spending, we're focusing on that sector or those sectors. We expect you'll see them expand and perhaps as a percentage of the S and P as well as the leadership shifts to a more broad group of participating industry.
Carol, when you look at your portfolio, do you need to change anything if Donald Trump wins this election?
We're feeling pretty comfortable about where the portfolios are, and a lot of it would depend on if mister Trump wins the election and what does the composition of House and Senate look like. So there's a big piece of that, and we typically have always advised people not necessarily to trade on potential who wins who doesn't. You know, the theory have been, for example, that energy stocks should do better under Trump presidency than a Biden presidency, but the
opposite to be the fact. So building sturdy portfolios for intermediate long term investment always is the wise and being able to adjust your tweak at the margins after we see what the outcome is.
There.
We might make some adjustments, but most likely not because we tend to build really sturdy portfolios and think the economy is going to do quite well under either president.
All right, Carol, thank you so much for joining us as always Kyle Schleich, chief investment Officer for Bemo Family Office.
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We've got Matthew Miller sitting in for Alex Steele.
Here.
I'm Paul Sweeney. We're live here in our Bloomberg Interactive Broker Studio. We're streaming live on YouTube's ahead over to YouTube dot com search Bloomberg Podcast, and that's where you will find us. Matt you want to talk about evs.
I would love to. Yeah.
Okay.
It's great timing that you're here, because we today we're gonna talk a little bit about EV's with our good friend Corey Kanter. He's the lead US Electric Vehicle Analyst. Yes, there is such a thing. At Bloomberg and New Energy Finance, they prefer bn EF.
I don't care.
Uh.
He joins us here on our Bloomberg Interactive Brokers studio. Corey give us a state of the market.
These days about where we are in this long evolution from you know, internal combustion engines to getting to an all electric world.
Where kind of are we on that spectrum today? Yeah, we're We're in twenty twenty four.
We're in a bit of i'd say a bumpy moment, bumpy first half of the year. If we step back and look at twenty twenty three compared to twenty twenty two, you saw in the US about fifty percent year on year growth for electric vehicles in the US. First half of this year, you're looking more at that kind of ten to fifteen percent, depending on where you get your numbers.
We were fifty percent growth last year and we're fifteen percent this year.
So basically, if you take out the largest automaker, Tesla, which has had a very difficult first half of this year, you're still seeing amongst the automakers, your high endie your Ford thirty forty percent year on year growth, more.
In the trajectory of what we saw last year.
But Tesla's stagnation and kind of i'd say aging lineup has brought down that US average more to that kind of ten to twenty percent.
Well, and elon Trump's pandering love for Elon Musk's pandering love for Donald Trump. Did you listen to that interview the other day? I think interviews the wrong word. Did you listen to that conversation conversation? I mean it was pretty crazy. Trump was like, you make great cars, but we don't all need electric vehicles, and Musk didn't even really go go up against them.
I saw some clips from the conversation. I think less of the overall listening. I'm on Twitter maybe too much, but more for sports and less for spaces. With Tesla in particular, there's been some challenges in California, as Bloomberg News his own down to Hall has covered. You've seen quarter, you know, on quarter reduction of overall sales compared.
To the previous year.
So Tesla may have a California problem. Actually, my sister just got a Tesla Model Why, which continues to be the best selling vehicle amongst TVs, and Ludlow.
Just got one, the co host of Bloomberg Technology, I mean, Marian just got one, who runs the makeup room back here. It's a hot vehicle in terms of sales, right, but it's not I guess, helping the overall number.
It's also they haven't released a new vehicle excluding the cyber truck, which has had very limited production, and all of those vehicles over one hundred thousand dollars. That kind of expected more affordable Tesla, which you know, if you talk to me a year ago, we would have expected in twenty twenty five, has been kicked back to you know, a couple of years afterwards. Tesla is aiming to introduce some low cost models, but I think, just like anything, Tesla's a moving target.
It's pretty low cost. You can get into a model.
Why.
I think after all rebates are said and done, for about thirty four grand, which you know it's not less than thirty I know that's where they want to go, but it's near as damn it to it. It's a problem though, when the governor of California asks people please not to charge your electric vehicles because the grid can't handle it, right, I mean, can we really get much bigger if we're already warning people not to charge.
I think I'm a you know, it's going to continue to be I think a challenge for electric vehicles in this particular year. That being said, California has had a lot of batter storage, right and if you look at how they're handling their grid, it's completely different than three four years ago. Utilities have to get more I think structured. I'm more concerned about EV charging on the public side compared to the vva G element of it. But sohos California,
so goes the nation. They've also had a stagnation there around twenty five percent EV shriff sale in the first half of this year. That's pretty much where they were at at the end of last year.
Really high, Yeah, it is high.
Are we seeing more chargers put in? I live in Scarsdale, and I've had problems with multiple EV charging stations either broken or too full. It would make sense to me for every gas station owner to just put in a couple chargers, but they don't seem to be doing it.
There is a challenge with what's called demand charges, which is then pulling from the grid. It may theoretically sound like a great idea, but if you're adding for those grid upgrades and those additional costs, it might not be worth it for the gas station operator. I think the good news is a lot of the federal money hasn't been spent. I think there's been a misconception that you know, the five billion dollars the nationally V infrastructure program has
actually gone out. It's gone to states, and they have to actually begin to deploy those chargers. So it's it's still moving too slow. In terms of the consumer, they want to see a charging network that they feel comfortable with them. Until you get to that point, you can hardly say that it's going well enough. You're also seeing this kind of NACS North American Charging Standard transition, the Tesla supercharging network that has also been stymied by all
the firings of that supercharging team. So it's messy and bumpy here in the US. I think in terms of good news, we can point out the Inflation Reduction Act investments beginning to actually come online and bear fruit if we want to talk about that too.
Samantha writes in and says, is hybrid the way to go?
Oh okay, Well, hybrid hybrids have done well in the first half of this year. You're looking at Toyota even aiming to go at full hybrid. I think plug in hybrids have maybe been overhyped in terms of the kind of focus and attention that's when you have both the battery electric engine and the kind of gas engine. There's not too many models besides the Jeep Wrangler P have that does well, so wait and see. I think both and hybrid are going to play a major role in
the US market going forward. I think with plug and hybrid, you need them to get a lot better.
I think.
I mean, my wife had the Volvo XC nine d T, a plug in hybrid for two years.
Doesn't have anymore.
That was a lease and we got we got out of that lease. But she loved it because for the most part she was just around town on electric power the whole time. In fact, in the first year that we had the car, she only filled it up with gas twice.
Yeah, that's pretty remarkable.
But is that like a niche use case or I mean, I feel like there's a lot of suburban that's.
Probably the idealized use case right of a smart PEF driver. And I think when we've done our reports and analysis on pvs, just as you have the more savvy BEV drivers battery electric vehicle drivers to you know, the more mass market, it doesn't mean that future PF drivers would would drive that way. They might just say, oh, we're going to fill it up with gas because we're used
to it with the hybrid experience. What we want to see more of is in China, the all electric mode is about twice the volume weighted average all electric mode here in the US. So you want to see more of those kind of like Toyota, you have ranged fifty miles forty miles less of this like eighteen because then are you really going to fill it up on electric.
My favorite hybrid that I've test driven recently for my podcast, which is called Hot Pursuit exactly. You can download that on Bloomberg dot com or wherever your podcast.
Of course.
I drove the Corvette E Ray really, which has the six point two liters V eight behind you and an electric motor on the front axle, and that eliminates any kind of lag that you might get, like zero to ten. So as a result, six hundred and fifty five host power zero to sixty and two and a half seconds.
Wow, how often you need to do that? Of course? Cory Canter, thanks so much for joining US.
Corey Canter, lead US Electric Vehicle analyst at BNF.
He's still talking.
I'm not going there, but these guys can go out and talk about it all they want, you know, but maybe I'll go hybrid at some point.
I think it's the way to go. I think it's the way forward for now, until we deal with the grid and the charging issues. You know, depends on your specific use case.
You're not driving the Volvo anymore.
Way, No, we switched over to uh. I'm actually I wish we'd kept it. I'm a little bit disappointed.
All right, we have to figure that out.
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We're here in our Bloomberg Interactive Broker Studio. We're streaming live on Youtubes. To head over to that internet thing YouTube, dot com search Bloomberg Podcast and that's where you find us. We have a season professional like a trader investor, like a person who does this stuff for a living, in studio Frank Moncam Senior Portfolio Manager and Timo in our Bloomberg Interactive Broker Studio.
Frank, what are you doing? In this market. Where do you see opportunities today?
I mean, I got the FEDS going out to Wyoming or something and they're gonna have some economists out there.
What do you how are you approaching this market these days?
Well, thanks thanks for having me on today. You know, I think that you know, the FED here is is probably getting everything he needs here to be able to pivot a little bit into into the easing cycle. We were looking at is just trying to be mindful of
the volatility. It's still plague in markets here. I mean, we get into this Jackson Hole meeting at the end of the week with a FED that's basically going to look at you know, what's going on in finishing conditions, right obviously we know to September rate cut that's not baked ten and for for for obvious reasons, in plats
come down. We've seen this decceleration and growth. You know, we had a little bit of an NFP scare here, but you know, we got we got to remind remind ourselves that this market has been super bowl though in terms of pricing. You know, the easing cycle. We went from seven cuts in the first quarter yeh to about three and a half. I mean it was five and
a half two weeks ago. You know, I think one thing I really want to watch is the FED is really not going to you know, come out with anything really decisive as far as the pace of right cuts between nine end of the year. But it's mostly there
the tone with which they describe the current environment. So what I want to keep my eyes on really is UH, what they're going to say about UH financial conditions easing UH and potentially our star right and you know, it's it's it's really one of those things where in terms of what we're seeing in the markets and how we should be positioning with with this spread meeting and and also the d n C. Right, there's there's there's a couple of vital catalysts that are on that kind of
this week. It's it's really to think about the fact that we're at a very liquid, you know market right now. I was joking with friends of the weekend saying, you know, the liquidity has migrated away from capital markets into into rose and at this time of the.
Year, it's typical.
So you know, the the the NFB print print for for August is going to be very critical. My my, my, view in this market is that the way that we've seen the Vics kind of retrace so quickly, to me,
it's not really a sign a healthy market. So I continue to want to be watchful of volatility ahead of us with the election cycle, with a geopolitical cycle, and I think with the Vicks having collapsed basically from sixty five to about sub fifteen today, I think it's an opportunity to look for some downslaw protection again as we get into the fall.
You know, Frank, you mentioned that sort of typical August liquidity problem that we've run into a million times before. Paul and I were talking about it before. Is that the main story of that correction we saw from you know, the first half of August that in the carry trade.
Was there anything else more there?
Do you think, you know, we're back almost.
To where we were before that that really nasty sell off.
Yeah, I think definitely. I mean it had to do with it. But I also think that, you know, I've been on the record saying that you know, you know, protection was really really cheap. I thought volatility was cheap. I thought, you know, skew was really cheap. It did materialize,
it was shortly, but it did materialize. But to your point, I think there's also the fact that the market is really over extending to the to the to the upside in terms of positioning, right, I mean, positioning was super overstretched, not just for the broader market, but also for you know, within the mega megacap tech sector. And you know, whenever you get you get to these levels, even with a bullish market, you're kind of due for a bit of
a of correction. And and it's funny when the market is is really overextended on technicals, which was the case, because positioning is a technical indicator. All it takes is just one little technical place to happen for things to unravel. And I think that's what took place in addition to you know the obviously the the the GPUI carry onlind and and also just you know, the SAM rule has has been triggered for a for a lot of augos out there that that trade around these types of signals.
I mean, all these things kind of all happened at the same time and in a period of time where the liquidity is very thin, So you know, I think it made a lot of sense for the market to pull back the way it did.
How about on the commodities. I mean a lot of people to say buy gold and short everything else. What I mean, you know, Mike McGall and I'm coding.
Yeah, sure, yeah, Mike, Mike's Mike's a front I you know, I it's hard to disagree with that, right, I mean, when you look at the commodities complex where we are right now, when you look at things like oil and copper,
you're still getting a lot of mixed signals. You know, for the take the case of oil for instance, you know, we we've we've got we've stayed into this range on let's use brent as a as a benchmark, between seventy five and ninety dollars a bow, and you can you can clearly see that it's it's it's it's a range that's that's been basically kept intact because you've got offsetting caalysts. So it's really market that's really.
Hard to read.
On the one side, you don't really want to short it because there's a cycular shortage of investment and crewd and all that stuff. But it's cyclical, is really fair fairly bearish, to be honest with you, And you know, opek, Now the OPEC put to me, is getting softer and softer and moving lower and lower. I think the Saudis need cash. I mean there's a little bit of a fiscal distress in Saudi's right now. I mean they've run they've only run a fiscal surplus, you know one of
the last ten years, says a lot. So for them now it's it's no longer trying to fight you know, the the you know, the flat price as much as they used to. But when we look at the market like gold, you know, it's really all starts, you know, being online. You know, there's there's I think there's additional
momentum here with central banks continue to buy. You know, this Chinese I'm hearing are kind of looking for a little bit of a pull back, you know, ten to fifteen percent to probably add add more, you know, the PBOC that is, which is the main buyer in this market. So you know, gold looks really really good, and only thing there it's it's it's a bit it's a slightly overextended to be upside, but there could be momentum there.
So I think the strategy really in commodities is I would want to ride this momentum and and you know, potentially it keeps on dry powder on the side to add on dips and also just just continue to look for a relative value of dis locations within commodities. You know, you know oil versus gold as in bullish bullish gold kind of bearish or oil. There is these kind of
RB plays, and you know gold versus copper also. Yeah, so you know, I think I think oil gold here is the you know, the main game in town, and the way to play really is to perhaps look for dips and look for ob players versus other commodities.
Yeah.
To get back to the FED for a minute, you know, I'm looking at our world interest rate probability function. It basically just susses out how many interest rate cuts the Fed funds futures traders are expecting.
It's look at it, like three and a half, maybe almost four cuts this morning.
Yeah, yeah, by the end of you know, and we only have three meetings coming up, so that's even thinking people are thinking we'll get a fifty basis points at one of them, I guess. But what's the risk there, I mean, is the is the market in Fed fund's futures just bracing for more bad eco news? And is there, you know, a risk one way or the other that they'll get this wrong.
Yeah, I you know, I thought five and a half cuts two weeks ago was over stretched. In fact, we're we're kind of we kind of took the other side of that, which is worked out so far. I mean we're down to three point eight that's roughly almost four cuts between and the end of the year. I think the real wager here is around the August jobs data.
Right if we were to break the one hundred k jobs mark and the unemployment rate to take up maybe to four point four percent or four point five percent, and I think, you know, there's a chance that we could get a fifty basis point cut in September. And I think what the market is really getting at here is that if we get fifty in September, we're probably going to get fifty on the next one because the Fed then realizes that maybe it's a little bit of
mind curve. So I think this whole wager is around this August NFP, which my my view on that is based on the seasonality of the data. I think the July print could could easily have been it could have easily been a bit of a an out liar here because of seasonality right.
In Houston to correct, and then some of the heat waves.
There's been a lot of you know, activities being canceled in the summer because of heat waves in a couple of states. So that's all playing into that. So I think it's one of those things where it could be kind of almost binary, where we either get the fifty to fifty twenty five, which gets you to the to the what you know, what works is w rb S pricing right now, or we might even get to a point where we only get one or two cuts, right.
It could be one of those things where it's kind of if if we realize July was a blip and we get it one, we might get it one and done with. I FED just makes an adjustment cuts because I think this thing is super telegraphed. They can't really backtrack on the September cut. I think it was spoop markets, which is not what the FED wants to do. So I think it might just deliver a twenty five and kind of wait and see post election if that's if we get a strong or decent NFB, you know in the early.
So no taking off on the Friday's payroll day. No, no summer Friday. Summer Fridays are over.
I'm for me, all right, Frank, thanks so much for joining us. Frank Monham, he's a senior portfolio manager and then team off. This whole money management thing doesn't work after you you get a voice for radio. I mean that's like, I mean incredible. I just told my producer, let's get this guy in right.
In our Bloomberg Interactive Brokers studio. We appreciate getting some of his time.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple card Play and Android Otto with the Bloomberg Business. You can also listen live on Amazon Alexa from our flagship New York station Just Say Alexa playing Bloomberg eleven thirty.
Paul Swynn here and Michael Reagan sitting and for Alex Steele said, day, Stay Lauder, el's a ticker symbol. Stocks down like thirty five percent that year to date turnaround change in management. Red Brown Joints earnings reporter for Bloomberg News, read what's going on with that stay Launder?
Yeah?
I think today you know, the highest level is just like this is a clean slate I think for this company. We saw obviously CEO stepping away at the end of this year. CFO is actually also leaving on the same time, so you know, a new management team. And also if we look at the guidance that they gave out for their fist with twenty twenty five today, it came in much lower than what an elks we're expecting and else
we're expecting to see constant currency growth. They were expecting to see earnings about the whole dollar higher than what the company guided for. So again just kind of setting a low bar for this company going forward, clean slate, let's go from here, I think is kind of the message that they're going to be trying to change the narrative to going forward.
Red How big of a deal is China to Estay Lauder. I know they have a pretty decent sized business. There was that part of the sort of disappointing results this quarter.
Yeah, I mean, I think that is the main culprit of the issues that they're they're going through. I mean, we've seen throughout this earning season a lot of these companies, especially in the luxury space, that have tied their fortunes to China are paying the price of that at the moment.
So China came in really soft again this quarter and als we're expecting for around three or four percent growth in the Asia region, which is dominated by China obviously, and what they saw was a four percent contraction in that market. So yeah, again paying the paying the price for the investment in that region. As China sales demand for these luxury products, whether it's LVMH's goods or you know, fashion,
anything like that. And then also skincare, fragrance, things like that are also weak as the demand waivers there.
Just reading some of the reporting on this here company in the midst of a turnaround, I'm not sure necessarily what it has to be turned around, but the stock's down thirty five percent, so that tells me that a year to date, So that tells me whatever they're doing ain't working.
So when you get it, presumably a new management team coming in.
Do they want somebody from inside or maybe some fresh set of eyes coming from the outside.
What's the thinking there?
I think you know, both the CEO CFO have been there for over a decade now, so I mean it's always good to have somebody within the company knows the company, but it might be time for some fresh eyes.
The company has.
Missed guidance or cut guidance several times over the last few years. Analysts start to get when that happens, analysts starts to feel they starts to lose comp It's in in that management group's ability to understand or grapple with the business dynamics at the moment. So I think there could be some calls for an outside look. The company says they're already undertaking the next CEO search. Obviously they're going to say they're they're considering internal and external candidates.
But yeah, definitely might be time for a for a fresh look.
I'm smirking here a little bit looking back on a story we had out in February on Esta Lauter, where CEO Fabrizio Freda said, I'm not going anywhere precedent, but Red, you know, I don't know how much of an expert you are on the beauty care market and skincare, but you know, are they an outlier here? As far as you know, you go through a million earnings reports every
quarter year? Are they are they an outlier as far as that you know, consumer discretionary space or are we seeing similar stories from other you know, companies that depend on I don't know whether it's beauty care or you know, high fashion, you know, is is there.
A theme here?
I don't know what gave it away that I'm not ANX but you have good skin. No, I don't think they're an outlier. Look, I think it's you see something for me. The similar trend that I'm picking up across all of the retail, even you know, something as far away as home depot is that people are focused on needs, not once and this luxury space skincare especially.
Is a want, it's not a need.
A fragrance is a want, not a need. So consumers are cutting back where they can, whether it's you know, fixing your house up or yeah, making yourself appear a little bit better, it doesn't matter. That's that's kind of the the macro pressure is gonna win out in this this this this scenario.
But as our good friend Samantha writes in Alex Steele has always told us that you have to invest in your face, which she does and Michael John Tucker and I do not.
So I mean, clearly, my face is a value stock right now.
But all I know is during the lockdown across the street, the Spore store packed.
Yeah, I mean, no matter what, people need to get that stuff.
Yeah, I mean, I guess in the pandemic people had a few extra bucks they weren't spending on concerts and movies.
It was just it shocked me how strong that category is.
Yeah, and then right after the pandemic as well, they did really well because people were like, I'm.
Emerging from the world.
I want to make sure, Yeah, I haven't shaped my face in six months, I might as well get moisturized or something.
But yeah, it's there.
There's trends have just fallen off now and they haven't really returned to like pre pandemic.
Levels of growth.
You know, excuse me.
Este later was a was a company that was like really you know, flying into the pandemic and through the pandemic. And then yeah, just the the fall off of China and then the United States as well is kind of not getting a lot of attention at the moment. But like US sales contracted as well this quarter. It's maybe hidden because there's been so much emphasis on China. Yeah, but those are the two biggest markets and both are are are underperforming I think at the moment.
So it still seems like China's consumer economy is a bit of a black box to analyst, Do you find a lot of surprise is either upside or downside on companies as far as their their business in China goes.
Yeah, it's hard to get a read because if you think, like there was so much worry and again jumping around here, but I just connecting all the different kind of earnings threads, Like there was so much worry going into Apple's report of like where where's the Chinese consumer? Are they buying iPhones? Things like that? You know, it's the same dollar that's going towards these things. But yeah, it's really hard to get a read because Apple well performs, Esday Lauder underperforms.
Yeah, it is.
It is just a kind of you know, most of the analysts, they said here in New York, they're just looking at data points, so it is kind of a tough read.
I'm looking at the stock of Esday Lauder and looking at the chart here at Pete at about three hundred and seventy dollars literally on the last trading day of twenty twenty one, down seventy five percent since then, Wow, from three seventy to here we are at ninety four, So a big move here, And I guess the next you know, in Vidia is coming up.
That's still not for another week or so, right.
Yeah, that's next Wednesday.
I mean, they're so late in the earning cycle. I don't know why. I'm sure there's a story there, but man, it feels like the market's going to be hanging on that one.
Are the expectations as high as they always have been for in video?
Yeah, they will, of course, they will be flying extremely high into that that report. And then if we think kind of about the AI story of this earning season is that people have been maybe investing a little bit too much. We're not seeing the growth that we would have liked out of those investments. But of course in videos on the other side of that, they're one, they're the ones receiving a lot of that investment. So could be again kind of the outperformer of of of that group.
But yeah, definitely very high expectations. And yeah, with high expectations there's high risk as well.
Anything else on your radar read that you're looking for. You know, we're in that kind of weird period for earnings where you only get the stragglers. Is there anyone else we should really keep an eye on.
Yeah, I mean, it's just it's it's continue with the retail stocks over the next week especially.
I'm just trying to think.
There's like a thousand names running through my mind now.
But the retailers, they tend to come late in the cycle. Yeah, it'll be good, good read on the consumer. And then again, as you mentioned that, the the Nvidia coming up, this can be huge, not just for like Nvidia itself or the tech stocks in general, but I think the market overall.
Yeah, it really seems like it's the will show us the money phase of the AI craze right now, So you know, you know, an end video might be the outlier there.
But all right, we'll say on top of it, I'm sure we'll be talking to you.
Red Red Brown, Ernie's reporter Bloomberg News, joining us live here in our Bloomberg Interactive of Broker's studio here.
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